It could have been possible, lore-wise, to continue your character from MW to OB, because one side effect of the Corprus disease was immortality. From OB to TES V (Skyrim?) though, an elven character might still be around (noticably older) after 200 years, but any non-mer would be long dead and gone without some impressive spells or enchantments to keep them alive despite their debilitating age and decrepitude.
The problem with using a previous character is that you'd either have to reset all of their skills and attributes back to where they started (and come up with some funky excuse for that), or else there'd be no point in playing the new game, because you'd already be "maxed out". You certainly wouldn't want to make the next game for high-level characters only, which would rule out any sales from potential customers who didn't already own OB, and it would be absurd to have a region where all of the inhabitants are high-level "demi-gods" at the very least, unless you're making a game specifically about the "afterlife".
The fun (in my and many other players' opinions) is in building your character in new and interesting ways, not being invincible and running around killing everything that moves (which can be fun for a VERY short time, but is generally sufficient reason to delete the character and start a new one).
As for the "decendant" point, I actually tried making an OB character as a grandkid of my one MW character, but the "mainstreamed" and gutted character generation system in OB made a mockery of the attempt, and I quickly gave up on that idea. I pity the diehard DF fans who had to settle for what MW did to all of their favorite quirks and other character choices, only to see it taken an even larger step backwards in OB.