The possibility of a Dreugh partially underwater city (and maybe of a little kingdom) lies in the intersection of two matters which are in my opinion of high interest.
First, Skyrim has access to the Sea of Ghosts. Obviously, the first word that pops in one's mind when associating the Sea of Ghost and Skyrim is Roscrea. This Island isn't likely to be in the game, but I think we can hope visiting it in an expansion. Moreover, some sort of Seafarers' Guilld sponsored by a royal house in Solitude, would be in my opinion a great faction, which would organize exploratory missions in the Sea of Ghosts, and wouldn't disagree with the existing lore (to be convinced, just have a look at the third edition of the Pocket Guide to the Empire).
Second, many humano?d creatures live in Skyrim. Many of them seem to be able to speak (there were language skills in Daggerfall) and to craft things (I think there were some dreugh weapons in Morrowind, but I'm not sure). Some of them even seem to be very intelligent (I especially think to centaurs). Thus, many of them seem to fulfill the seminal requirements underlying the development of culture and civilization. However, they don't earn any form of imperial citizenship or recognized rights, so that little to nothing is known about their possible culture. We just sometimes have a glance at it (I think to a quest in Oblivion involving Goblin tribes and some sort of religious totem).
In my opinion, it would be very interesting to learn more about these so far overshadowed possible cultures, religions, and maybe even civilizations. Not only would it give the game more depth and complexity, but it would also create more diversity, for example in the design of weapons and armors. Moreover, making these creatures more intelligent and able to use weapons would rise the challenge for the player. Their weapons would be worth fighting for, but only to the cost of more difficult fughts with ennemies that aren't easy to defeat and may chose to run away.
I'll just write down some examples that tend to form nice pictures in my mind.
I already mentioned a Dreugh city. If Dreughs are able to build a whole city (and they once were), it wouldn't be astonishing for them to have some crafting abilities. And since tridents are often associated with the realm of oceanic waters, the picture of a Dreugh holding an awesome Dreugh-fashioned trident is just one step further.
Another humano?d creature I love, is the Spriggan. Would you like to find a very well hiden Spriggan village in the deep Skyrim forest, possibly suspended in high black ironwood trees? I can't figure out a Spriggan using a trident. I think vicious strategies would fit them pretty well. Engraved wooden blowguns, war whips made with poisonous or enchanted brambles and garrotes would suit these treewise beings, in my opinion. I would quite easily imagine one of them seemingly fleeing to catch the PC in an ambush, with other Spriggans dissimulatid in a dense, misty forest, and shooting poisonous little arrows at the careless player.
In the very same way, one can imagine a peacefull community of goblins in some very great cave, living in a little city at the shore of an underground lake, centaurs gathering around great cromlechs (by the way, I think a centaurian Lochaber axe would be great), or even Udyrfryktes attending a bestial religious ceremony related to their Matron.
The only boundary for the possibility is set by the developpers'creativity. (Hum... after one second of intense thinking, financial reasons may appear as a more effective limitation.)
So, what do you think about the Sea of Ghosts and what it should or shouldn't contain?
And what do you think about the possibility to discover the culture of some humano?d creatures?