First of all, I gave my reasoning as that the Dwemer ruins are below the stone city and the stone city was built over them by the men. Also, I don't see how being able to shape stone makes them generic dwarves. I mean men and mer can carve stone into architecture but they aren't dwarves. Now if they retroactively make the Dwemer short, that's when I'll go into a rage lol.
So, in conclusion:
Dwemer ceased to exist after the became the skin of their Robot God.
Chimer(people who followed Veloth to Morrowind) became the Dunmer.
They both had golden skin, because golden skin is the natural color for Mer, especially the closer you get to the original elves.
Your right. The Dwemer and Dunmer were not the same race. The Dwemer and Chimer (the original Dunmer) were at odds with each other most of the time. The Chimer became the Dunmer when the Tribunal tried to summon Azura and Azura cursed the tribunal and all of the Chimer to have "Eyes as red as lava and skin as black as their hearts".