It's different when there's thousands of people involved. People would simply move away, and definatly lose faith in Vivec if he where to leave the MoT there, if he could, and the people knew about it.
Even if he somehow forces the people to stay, he can't force them to have faith. He needs faith to power the likes of the Ghostfence and to keep the MoT up. (I believe)
You assume a very modern notion of fate that doesn't really fit into a fantasy society. Historically, even if a landscape was ravaged by war and plague, people rather tried to figure out what they had done wrong that God would punish them with such scourges than question HIS integrity. In ancient Greece, people tolerated behaviour from the Gods that they would have questioned in their next door neighbour. Hey, they are Gods, they are entitled to do things considered highly questionable when done by mortals. Strike down people on the spot? Check. Abduct someone else's wife? Check. Spin webs of intrigue to start a war? Check. They are Gods. They have their reasons to do the things they do that no Mortal can ever hope to comprehend, and even if not, as Gods, they're entitled to live on a whim. Likewise, the inhabitants of Morrowind would very much accept that Vivec does what he does. If they keep their faith, after all, there is no danger. And no, people wouldn't move away. They'd be under immense social pressure not to, because doing so would be seen as reckless endangerment of the lives of those who stay.