The daedra cannot create life, yet the dremora serve them... I'm very curious as to the origins of the Dremora race.
I've recently noticed the ears of them in Skyrim - they're pointed at the top, suggesting that they are/were Mer?
Doing some research, all I could find is that they serve the daedra, mainly Dagon, but where did they come from?

Same as the Golden Saints and those other guys from the Shivering Isle.

They are what they are.

They, like all Daedra, emerged naturally from the primordial chaos at the beginning of creation.

They are a race of daedric creatures. Just like Clannfears, scamps etc.

What I wanna know is, what did they do before Dagon reigned them in?

And by the way, pretty much everything but humans have pointed ears. Giants are closely related to humans, but have pointed ears.

I was always under the impression that the various daedric races were essentially an extension of their prince's essence, like the planes themselves.

Hmm... Interesting, thanks for that little tidbit. And I agree with your first statement, I'd like to know that as well.

good point, but let's look at the Hunger. Servants of Boethiah, yet they're demented enough that Sheogorath keeps them in the Isles.
And then what about atronachs?

The dremora and their honorable kinship kind of reminds me of orcs.

Lesser Daedra are separate from the princes.

Lesser Daedra serve who they will, it's just that most Dremora serve Mehrunes Dagon. You might want to read http://www.imperial-library.info/category/tags/dremora to get a better understanding.

Aren't all Daedra just spirits of lesser or greater power that did not participate in the creation of Mundus?

http://www.imperial-library.info/content/monomyth to the resque!

"So the Daedra Lords created the Daedric Realms, and all the ranks of Lesser Daedra, great and small. And, for the most part, the Daedra Lords were well pleased with this arrangement, for they always had worshippers and servants and playthings close to hand. But, at the same time, they sometimes looked with envy upon the Mortal Realms, for though mortals were foul and feeble and contemptible, their passions and ambitions were also far more surprising and entertaining than the antics of the Lesser Daedra"

Velehk Sain is a pirate on Mundus. Possibly the most famous pirate king. He hates Oblivion and acts a lot like a mortal. He likes loot and gold and money.

As concepts and ideas given physical form, their appearances as bloody warspirits are all that a mortal mind can fathom. Or something magical.

Miserable Clockwork Oranges made in Dagon's own un-image.

I'm guessing they did what they loved, killing and fighting amongst each other, most likely the more powerful ones took in weaker ones to create armies and just fought each other for fun.