They havent really stated that the Argonians actually captured any cities or anything in Morrowind, simply that they invaded. Anyone found anything in Skyrim stating otherwise?
There was stuff in the novels. Infernal City says that they practiced rituals in the crater of Vivec. Lord of Souls says that they have prevented the Empire from reclaiming the territory. Skyrim has the http://imperial-library.info/content/skyrim-lymdrenn-tenvannis-journal whose city is being overrun.
As for Vvardenfell, I would bet that its almost comletely destroyed, what with the Ministry of Truth hitting Vivec with all of it's original force (it was an asteroid was it not?) and then Red Mountain erupting. The eruption sounds more like an explosive one ie Mt. St.Helens and Vesuvius to do damage on the scale they talk about. Houses Hlaalu, Redoran, and Telvanni would most likely be completely destroyed as they had 90% of their holdings on the island.
A destruction of that magnitude would have had more far-reaching impact elsewhere on Tamriel. As it is, there was damage on the coast of Skyrim and tsunamis all over the place. There could have been other events that we did not hear about, but I doubt that the whole island blew up (especially since we do see it in Skyrim)
Also, the three Vvardenfell great houses did have holdings outside Vvardenfell.