It is mentioned levitation was rediscovered by a guy from the Synod. But, as the old redguard alchemist said, in order to learn that kind of knowledge, you need to be part of the Synod and pay a few years worth of dues before you'll get the chance.
Though 200 years after, I can see levitation making its way to be a more widespread spell.
omg, that would soooooo not happen. There are so many mages/wizards/spellcasters from every province that know levitation. It'd be impossible for everyone to forget it. That's like saying suddenly everyone in America forgot how to ride a bicycle. I mean, I understand why they got rid of levitation; because cells wouldn't load in Oblivion, and so the employees had to make a witty and clever idea of why it wasn't in there. Flat out saying "because we couldn't get the cells to load" sounds kinda stilted and dull.
@Redmer the Wise, yes, "Passwall" was gone from the other games but probably only because it worked in Arena. I hadn't had a chance to use that spell in Arena but according to http://www.uesp.net/wiki/Arena:The_Known_Spellbook, it could destroy 3 walls. Now I don't know how Arena was built but I'm guessing it worked well enough to implement that. But try doing that in Daggerfall, Morrowind or Oblivion where walls are part of the entire building in most cases. Stuff like that goes away from games because the developers can't figure out how to get it to work in new releases of games. I mean, really, Telekinesis should be able to "move" walls out of the way. But ya know, it's just a video game. Can't expect it to have real world physics.
@Hellmouth
I liked your first response...... "because they couldn't". Hahaha. Reminds me of when a kid asks why and the mom says "because I said so". I'm betting your answer is probably the same answer the author would have; "because that's how I wrote the story. That's why." lol