When I was playing morrowind I plundered dewmer ruins for gears, cogs, and other contraptions. I guess the most importaint thing is that the game is fun, but Nords are humans right? So after 200 years since Oblivion techological regression seems kinda weird to me.
Perhaps you should go back and look at the Dark Ages, then we can talk about technological regression.
Besides, like I said, there may not be a culture that fosters technological advancement. The ancient Greeks invented a simple steam engine, but it was never more than an object of curiosity. No one ever developed the design or put it into practical use. Why? The most common answer that I've heard is that they didn't need it. Why take the tame to develop an engine when you have slaves aplenty to do the work for you?
Magic probably has much the same impact on Nirn when it comes to technology. Why take the time when magic can already do what's needed? Why develop a gun when a mage will do the job just fine?