I'd imagine it's something like that, or just people "Blessed by Sheogorath" (Read: Insane.) This explains why we see Big-Head there, and why everyone there is in some way crazy.

The Deadlands are full of NPCs. On fire, stuck on spikes, hanging from the ceilings. Some Realms have NPCs, some don't support them very well. All the humans in Coldharbour are either in slave pens or charnel houses.

Good point. What about those ruins in Passwall? It will take years to build large stone structures, so I wonder if some people just settled to live there, without trying to get through the gates. Because if Passwall was only there to get a roof over your head and trade some equipment while figuring out how to get past the gatekeeper, why would anyone want to invest in building large stone structures?

There's a book that establishes that the ruins are from a civilization that existed before, and was ended by, the last greymarch.

Most people are weak. They aren't the mighty fighters that the Champion of Cyrodil is. Therefore they wouldn't have dreamed of attempting to bypass the Gatekeeper.
Which means they would have to wait patiently for Sheo's blessing. That could take years for some, some may never get the blessing
And after a while people would want to settle comfortably and patiently

Passwall and the gatekeeper are recent. The Xedilian trap was used prior to that. The area of the gate will have been open land for the people of the isles, they could build the cities on the ground that would be encircled by the gate.

Good points again. Thanks, guys.

I always figured that people ended up there similar to how you did, Gate opens and people entered.

It probably helps that people don't seem to age in the Isles, at least not as quickly as in Tamriel, as Ciirta had been alive since the last Greymarch. Of course, Sheogorath probably does have to repopulate the isles, given how dangerous it can be to live with a bunch of other crazy people. Not to mention the monsters.

Hahaha