I don't think the beast races can breed with Man or Mer.
Morrowind : Island full of racist a-hole Dunmer, who keeps beast-races as slaves - presumably no interbreeding.
-> The Beast races have radically different physiques than the humanoids, walk all funny, hardly ever say a word.
Oblivion : Nice candyland accepting Cyrodiil-ians, everyone polite and friendly, Beastmen abound.
-> But here they have almost completely human physique, and are just as chatty as most people.
Clearly, the beastmen in Morrowind were pureblooded, whereas the ones in the heartlands were human/beastman-mongrels.