There is no Elder Scrolls MMO in the works, and I don't believe we're likely to see one in the near future. For one thing, Bethesda has shown no interest in making such a thing. I also do not want an Elder Scrolls MMO to be made, this also seems to be the popular opinion on these forums.
As to how it would effect my interest in the series, the existence of an Elder Scrolls MMO, in its own right, would not turn me off from the series, as long as single player Elder Scrolls games continued to be made, after all, why should I care if there's one game in a series I don't want to play, as long as it doesn't effect the ones I do? If an Elder Scrolls game were made now that I did not like, it would not in any way diminish my opinion of the games that have already been made in the future, and while I might be a little reluctant to put my faith in any future titles after that, if Bethesda showed that they recognized their mistakes and were trying to fix them, my confidence in the series could still be salvaged, my main concern would be that the game could end up having an impact on future games, if it turned out to be successful enough anyway, Bethesda could decide to keep whatever aspects I didn't like, and it could also introduce changes to the Elder Scrolls continuity which I do not approve of, which brings me to the next one.
I do not believe an MMO would have a good impact on the Elder Scrolls lore, maybe it wouldn't have much of an impact at all, but I certainly don't see anything good that an MMO could bring to the series story that couldn't be done in a single player game as well. I could also see an MMO being bad for the lore, for one thing, an MMO might potentially require changes to the setting in order to make it more compatible with the MMO style, changes which, if incorporated into the overall continuity of the series, could be detrimental to the appeal of the universe. Moreover, MMOs are rarely very good at story telling, usually, what little story there is just serves as an excuse to justify generic quests or joining up with your friends to raid dungeons for loot. In fact, the only MMO that comes to mind which promises to make story a major focus is the Star Wars one currently in development, but I'm not going to go into detail on my thoughts on that here, as it's frankly a subject more suited for community discussion, but I will say that I'm still a bit skeptical about whether what they're trying to achieve can actually work in an MMO environment. And considering that MMOs are rarely good at story telling, any new lore added in such a game might be of less than desirable quality, and could potentially be detrimental to the world as a whole.
In short, single player is still the direction I want the Elder Scrolls series to take.