Before you choose to implant or not a Great House , I think you should ask WHY the Great Houses could be interessed by this settlement.
If the Imperials are in command then the Est Empire Company will claim the first dibs on Northreach then maybe some Hlaalu will make their move, some (il)legal Telvanni squaters or smugglers setlling in the extremes reachs,...
For me the best answer is Stick to the lore : Imperials invade en masse , settle then wheel and deal under the Pax Imperia : they pull a "Raven Rock".
Hlaalu worm their way through brides, blackmail and good old cloack 'n daggers ( in the Imperials and locals back...).
Telvanni don't give a rat ass about laws, customs and the neightbours but fried anything who threatens their interest.
Redoran are powerful, seek to expand their borders to reconstruct their declining status as a Great House but lack the political savvy of the Hlaalu and their honor impede them for an aggressive politic like the Telvanni.
Weight the pro and the con of each faction and their grip on Northreach but more impotant settle them as they would for such a case.
I'm going to have to agree on this one. There is absolutely no good reason for any of the great houses of Morrowind to be in a Nord settlement that far to the North. In fact, if you go by lore, there should be hardly any elven-kind there at all. However, that does sort of take all of the fun out of it...
I would suggest that you go primarily with Nords, followed closely by Imperials. Perhaps a smattering of other races, since it's a port. However, as far as full-time settlement goes, that island is far too small for a great house to set up shop. I could see a lone Telvanni stronghold, especially if there is a Dwemer ruin nearby.