But Vivec lies. All the time. The whole of the sermons is (sort of) a lie. What if he was just trying to keep the Dwemer hidden?
Vivec is a poet. Poets use lies to tell the truth. The sermons are a prime example. They may have plenty of lies, but they are lies that guide you to the truth. You can even find two hidden messages in the sermons that blatantly admit to murdering Nerevar. And most of your direction conversations with him are truthful. I also see no reason why Vivec would lie about the Dwemer. And considering that his is the only word from a god, I think it'd be too presumptuous not to listen.
I've long felt this to be more of a case of Vivec pretending to be far more powerful than he actually is/was. Or at least thinking himself to be more powerful. When I read that bit about him not being able to sense the Dwemer in the realm outside of time or whatever, I just thought to myself: "Umm... maybe that's because you're senses aren't as sharp as you think they are? What do you think of that Mr. Floater?"
Then again I've never held a high opinion of any of the Living Gods, mainly since they weren't real gods like the Daedra, who couldn't be killed by whacking a disembodied heart with a pair of weapons made almost four thousand years ago by a mortal.
There's plenty of debate as to whether or not the Tribunal and Dagoth Ur are actually dead. After all, Vivec explains how he exists in two separate states, the "mortal" aspect that is there, talking to the player, and the "god" aspect that is outside of time and space and is everywhere. While the Heart was still active, those two aspects were one. When the Heart was disenchanted, they split. Thus, the "mortal" aspect could be killed, but the "god" aspect lives on. Can you ever truly kill a god?
It's similar to the case of Mannimarco after the Warp in the West. There was the mortal aspect, which we encounter in Oblivion as the Altmer necromancer, and the god aspect, which we see as the Necromancer's Moon.
T.T you just crushed my dreams... Then where did they goooo!!!!! Oh my goodness this is driving me crazy!
In addition to developers explicitly confirming this, I think it is safe to say that the fact is, the majority of the living Dwemer souls became the golden metal skin of their Brass God, Numidium.