Yeah, I wasn't sure if they had signed the treaty. But my point still remains. The empire can do nothing. If they try to stop the Argonians from invading Morrowind, they have no chance. Even if the decide to claim the livable parts of Black Marsh, they've got new, swampy land in Morrowind. (Not that the Empire would anymore, with the beaurocratic leaders)
That's why they simply asked the Argonians nicely, instead of invade.
You know, Argonians represent the hunt admirably. Using thier surroundings to thier advantage, hiding in the shadows until the opportune moments... I love those guys. ^_^
Except that such is not really credible for lizard creatures, which are ectothermic. More, with the volcanic eruption, it would be the Argonians who's suffer most, and there'd hardly be any swampland left in Morrowind. With the impact of the rock, the land outside the immediate area would likely raise a bit, and both the debris from the impact and the ash from the volcano would cover the land and fill up most of the swamp land with highly porous ash and rock. More, the amount of ash and debris released would likely lead to noticeable global cooling by some degrees (note the 1991 eruption of Mt. Pinatubo is detectable in temperature records through a temporary drop by about 1°F / 0.5°C and released a huge volume of ash up into the stratosphere). As we can see on the maps of Vvardenfell, the north/south axis is the primary lane of ash deposits (and most likely the areas in southern Morrowind are as fertile as they are due to not getting enough ash to completely crush the area but getting enough to regularly fertilize the area). This means that in a major event (impact plus eruption), both the central plain and the southern swamps would be hit pretty heavily, and the worst effects would likely go well in to Black Marsh.
Yes, you can explain anything away by magic and the will of gods. But for an author to make the point "Look, there's this huge geological event, but its effects are just local and just the ones I like" is, sorry, some of the worst writing I've ever seen.