That was my point the whole time.

You were confusing me, seeing as you didn't accept the fact that the Heart is gone...

No.
I said it's possible that the heart could just have fallen with the rest of a rubble even though it appeared to explode in game but if it is written in the lore that the heart exploded, spun and disappeared then obviously in this case it was an accurate reflection in game. I haven't read all the lore, afterall.
I never said I was convinced about anything; if I was, speculation wouldn't be very interesting. I had only assumed originally that the heart would just fall and return to the state the Dwemer found it in originally but that was before this thread made me actually think about it.

Kinda skimmed the posts so far, sorry if this has already been mentioned...

But if I recall correctly, when Lorkhan's heart fell into Nirn, it made Red Mountain. So, it must've had some sort of localized location... if not physical, then at least a metaphysical location bound to a physical location... If the heart leaves Red Mountain, what, if anything, might happen to the Red Mount?

Just throwing my thoughts out and around, mind your head...

Your question has been answered: Oblivion happened. The removal of the Stone that started and stabilized creation was removed, easing Dagon's entry into Nirn. I don't think anything will happen to Red Mountain; I'm not sure if it matters anymore.

I advise reading http://www.imperial-library.info/obscure_text/nu-hatta_nu-mantia.shtml#7 to get what I'm saying about Stones and whatnot.

I would like to know if the heart existed in the physical sense before the Dwemer cast their enchantments onto it. After all, when the enchantments are dispelled, the heart disappears.

I'll just say this before someone more knowledgeable puts me to shame (note that this is just my opinion):

It had to exist in some corporeal sense for them to cast anything upon it; I don't think it was invisible. http://www.imperial-library.info/mwbooks/kagrenacs_tools.shtml the Dwemer found a magical stone they believed to be Lorkhan's Heart, sooo...

The process applied upon the Heart at the end of MW was quite aggressive and unfocused (as I think I mentioned earlier); to me, I have no trouble accepting that, after striking the Heart in such a manner, that it would disappear in such a manner.

edit: Added link.

it crashes into a boiling pit of lava

What do the tools do? They change myths. Lorkhan is only a giant with organs and flesh because of the way Nirn interprets the mythic dance of its creator spirits. The mortal plane is in great part the flesh and essence of Lorkhan. You removed the mythic significance of his physical heart, and collapsed the enchantments and stories that were built on its existence- powersource for the walkers, Stone of Red Tower, a mythic symbol that made four Chimer divine. The Heart, for all intents and purposes, is still there, it's just no longer a symbolic object of power, and the Star-Wounded East isn't the Heart of the World anymore.

I thought banishing to Waters of Oblivion occurred since....well, it did the same thing Dagon did when he was banished.

Yes indeed.

At the end the Heart started spinning and grew smaller until it vanished. It didn't break, shatter or fall, if anything can be said at all, it disappeared. It wasn't destroyed, but it certainly isn't in Red Mountain either.

The Heart being Lorkhans divine spark, I would expect it to return to where Lorkhan is or what is left of him.

I'd say it teleported to a place where mortal hands couldn't touch it.*

*Says the guy who has done nothing but procrastinate as far as the morrowind MQ is concerned

Lorkhan's heart is the existence of the Mundus. Without it, the Mundus would cease to exist.

The heart you saw was Lorkhan's essence that had been bound by Dwemer enchantments, allowing them to conduct experiments using the congealed energy field.