Perhaps I'm misunderstanding the most commonly cited Mer creation myth but it seems like they believe the Et Ada we now call Aedra created the world and had to interbreed in order to create the first race, elves. So, if this is what most elves believe, how do they account for the fact that Khajiit and Argonians were on Tamriel before them? Or do they not believe this?

When Lorkhan tricked the other Aedra into making Mundus, limits were placed upon the world and some of the lesser et'Ada trapped within had to break themselves into smaller parts to become the mortal races. They became the Ehlnofey, which broke off into two stocks; the Ehlnofey who stayed put and became the merrish races, and the Wandering Ehlnofey, who became the mannish races.

Khajiit were not there before, they are an offshoot from the same stock of Ehlnofey that became Bosmer, technically making them a type of mer themselves. This is evident in their Ohmes breed. Their common ancestors originally having no concrete form, Azura bound a number of this original stock to the Lunar Lattice so their form would be dictated by the moons, while Y'ffre turned the rest of them into Bosmer provided they obey the Green Pact.

Argonians were originally a type of ordinary lizard descended from some of the subgradiated et'Ada like the rest of the mortal races and animals, but they were changed by the Hist into the various humanoid forms they have now by drinking their sap.

"Elves consider themselves the only 'truly human race,' being descended directly from the gods, and regard the Manish and Beast races as highly intelligent animals." Morrowind savants

That's the Temple Zero Society style story we as players know.