Why do the Dres "deserve" it? Argonians kind of started it when they killed all the humans and elves of Argonia. Even the border of Argonia in Oblivion is expanded into Dres territory. Seems to be a mutual hatred of the other and the Dres just know how to profit off of it better.
Edit: Any confirmation on the Morag Tong stuff?
An eye for an eye leaves everyone blind. Besides, while I could see the Hist doing something like that, the hypothesis does not have enough evidence to support it. I very much doubt the Argonians themselves would choose to do it but who knows? Maybe the Kothringi were a nuisance. Also...what elves are you talking about? i only recall some fox and silver human races. The Argonians and Dunmer have hated each other for a long time.
House Dres was the biggest slaver house in Morrowind, the house that sold the most slaves took the most slaves from border raids and generally speaking the one that made the most money out of it. So being against the slavery, as most people are, they are also automatically against House Dres.
All knowledge of the Morag Tong comes from a single thief inside the Thieves Guild... He says they fled after the Red Year with a promise to come back together at a later date, you'd think a 194 or so years would be enough to regroup but apparently Dunmer take their time.
Eek. Argonians sold their own into slavery as well. Not sure if they were TOTALLY against it but I would say they definitely did not like being enslaved. Like most people would not. House Dres also fought alongside House Hlaalu to abolish Slavery after the events of Morrowind. They beat back both Indoril AND Redoran. Quite a feat to do considering that both are full of great warriors and Indoril has a great deal of power. So while that does not forgive years of enslavement I don't think they "deserved" annihilation. But it is understandable that the Argonians would want some vengeance. Though not acceptable.
If you really want to get technical, the Ehlnofey started it when they destroyed the vast majority of the Hist's realm during their war. The Argonians were also "conquered" in 1E 2811 (their forces destroyed, and last remaining army retreated to the inner swamps where the invaders wouldn't follow), a few hundred years before the Khahaten Flu.
But still, there's no proof the Argonians were responsible for the flu. The first Pocket Guide, which was written 300 years after the event, called that a rumor, and the third Pocket Guide still said it was a matter of debate whether it was a natural occurrence, or if it was the work of an Argonian shaman (which, even if so, could've been a rogue working on their own). For all we know, the Kothringi could've created it themselves on accident.
Meh, the Hist stood there and decided not to pick sides in the Ehlnofey war. If they had maybe they would not have lost so much. If you really want to get technical. Anu clashing with Padomay. Anuic and Padomaic forces.
In regards to the Flu. While it is a rumor the simple fact is that's the best we get in terms of actual information half the time, in regards to TES History. The Argonians having something to do with the Flu and being completely unaffected by it IS suspicious. This also occurred around the time of all the pirates residing in Black Marsh as a hideaway from Imperial law or something, maybe my dates are wrong though. The Argonians were very Xenophobic about humans after that and were probably pissed. What little evidence we have points at the origin of that flu being made by something Argonian friendly. Maybe the Hist misinterpreted the feelings of the Argonians and decided to do something about it. Then got a Shaman to create the plague to kill off the humans and in the process wiped out two entire races of intelligent creatures. But of course the Argonians can do no wrong...
Back on topic.
Really most of what we know about the Red Year and the events that came after it simply give us too little information to make an accurate judgement on it. It usually comes down to the Argonian/any fans that hate the Dunmer saying Morrowind got utterly destroyed and the Dunmer fans/or whoever else likes the Dunmer saying nay tis not as bad as you claim!
One of my biggest disappointments with Skyrim is that not one of the Dunmer refugees even mentions how they feel about a damned meteorite smashing into their province and causing a Volcano to explode all over it. Seriously not one bitter old Dunmer with some details? Not very Dunmerish imo. I love the Dunmer and think they would be bitter as hell! Skyrim was a disappointment-fest with the Lore anyways though so meh.