I dont have the exact dialogue but i know the one you are referring to and it is from the vanilla game, not a mod.
What i recall is that the island of Vvardenfell didnt actually start getting westerners and actual trade settlements til 3E 414, which is 13 years before the events of TES3 take place.
As far as i know it was all temple holy ground before then, with only a few settlements like the city of Vivec and Ald Ruhn and sparsely populated due to the blight (which as far as i remember, has been around since the 2E 882 when dagoth ur ambushed the tribunal when they were doing their annual ritual in the heart chamber - though i dont think the blight became a SERIOUS problem until people started populating the island).
So in morrowind, the cities like Ebonheart, Caldera, Seyda Neen, etc, are all less then 13 year old settlements, which is why there arent too many big cities in vvardenfell, but a whole whack of small towns.
At least, that's from what i remember, it's been a little while since ive read that info in game. Anyone feel free to correct me if i'm wrong.