But then why are so many of their weapons, armor, and artifacts in morrowind and oblivion called dwarven?
That's because they're also called dwarves, "dwarf" is the western name while "Dwemer" is the elven name, so it's kind of like dark elf versus Dunmer or wood elf versus Bosmer.
Most likely, when Bethesda first decided to put "dwarven" weapons and armor into the games, they really were meant to have been made by generic dwarves, but as the lore got fleshed out they were eventually retconned into techno-elves, so they would seem a bit less cliche.
As to orcs, I do get the impression that in terms of gameplay, they're meant to fill a similar niche to dwarves in other RPGs, but in terms of lore, beyond a few superficial similarities, they have nothing in common.
Are there any images of what they used to look like?
As far as I know, no, but I'd have to agree with those saying that they probably looked a bit like Altmer, so really, I think Boethia did the right thing with eating Triminic, because of it his worshipers are no longer boring elf-things.
"Good Daedra" doesn't equal THE Good. Mundus is too grey for stuff like that.
Specifically "Good" Daedra are those Daedra that the Tribunal Temple won't burn you for worshiping, they're not really any more "good" in the moral sense than the "Bad Daedra". Granted, Azura might not be as prone to wanting to destroy things as Mehrunes Dagon, but that's just because she isn't the Prince of Destruction, it has nothing to do with being good or bad.