Dwemer were different heights Look at their armor.
Considering that all armor in Morrowind is one size fits all, I'd say the size of their armor doesn't tell us much about their height.
But from what I can gather, I think they're about at average height as far as races in Tamriel go, there are two stories explaining the origin of the name "dwarves" and neither is because they're shorter than most races.
But I must say the theory that Yagrum forgetting to flip a switch is what caused the Dwemer's plans to fail seems hard to buy to me, it just seems like too trivial of a thing to be the cause for something so great. I prefer to think that it's some sort of mistake an Kangrenac's plans, either he didn't do the math properly, or, due to the battle at Red Mountain, things got a bit too chaotic and an error occurred that made things not go as planned. Whatever the case, it's obvious that the Dwemer are... gone, even if they're still alive in some form or place, they're clearly not in any state to be interacting with the other races of Tamriel, and I think things will stay that way, I hope so too. The Dwemer were a fine concept, Bethesda managed to take one of the most cliched fantasy races, one that I often dislike even more than elves, and do something that was actually fairly interesting with them, but in the end, I think they've been done enough. They've been pretty well explored in Morrowind, and I think going into more detail on them might end up ruining the sense of mystery surrounding them, which would make them less interesting. Rather than covering Dwemer again, I'd like future games to instead explore something new, or at least something we don't have much information on.