I agree that Telvanni was the most interesting House and that Dres deserved what was coming to them however, Hlaalu didn't deserve anything, they were loyal servants of the empire. They backstabbed their own people, sure, but none the less loyal servants of the Empire. Although I do recall reading somewhere that Hlaalu and Dres 'merged' their houses in which case you are entirely correct that they both deserved it.
http://www.uesp.net/wiki/Morrowind:Orvas_Dren
Anyway, all of this was discussed in several topics before, but it is very unlikely that Morrowind suffered as badly as people say. From what we hear in game we can conclude the following:
Parts of House Telvanni have been destroyed
House Telvanni itself is still around
House Redoran is around (see assassination mission)
The Morag Tong pretty much stopped existing after the Red Year, but several members survived and agreed to come back at a later date.
Argonians were not out to conquer Morrowind, nor to kill all Dunmer
Mournhold is the southern most city which is certain to still be in relatively good condition. The other cities on the mainland are all really unknown.
Argonians can still live in Morrowind, as a Argonian family of farmers lives just over the border near Blacklight.
A thief stole Barenziah her crown (unrelated, but still kinda cool)
That's about all I can come up with. You can draw your own conclusions from that, but I personally feel it very unlikely that Morrowind is completely gone. Considering that House Redoran is around I'd wager that other houses are still around as well, Vvardenfell seems to be pretty much the same from what you can tell in Skyrim. Considering the terrain in Morrowind I'd find it rather unlikely for the Argonians to hold anything but the southern most lands of Morrowind that directly connect to the Black Marsh, and I seriously doubt they would want any other part of the land anyway.