You've got to remember (and I think Dwarven technology reflects this quite well), that it's unlikely Tamrielic machines would resemble our own technology in any way- they have magic, and it'd be incorporated into the machinery in some way.
Yet the machines they have now look pretty similar to what Earth would have in a technologically equivalent era. Magic does not seem to have as much an impact on the development of technology as one would largely expect to be the case, most likely because coming up with plausible worlds that are dramatically different from our own is hard, so most creators of fantasy prefer to just take our own world and throw in some elves and wizards and dragons, change the geography and names around, sugarcoat some of the more unpleasant details, and call it a completely original world.
But the Dwemer didn't just make technology, they combined steam powered machines and magic, and played around with the heart of a god, that's a bit different from just making more complex machines, no one is going to dissappear just because they did that, and if the research scholars have been doing on Dwemer has not gone to waste, they would know this, and would not let it hold them back from progress.
And you have to consider: does Nirn have fossil fuels? We use dead dinosaur and plant remains from hundreds of millions of years ago. The mundus hasn't been around that long.
It's hard to say, but if there is not fossil fuels as we know them, I'm sure that there are other things the people of Tamriel could use to achieve the same effect, if nothing else, they might be able to use machines fueled by magic to achieve similar functions to modern technnology.
They will NEVER reach our technological area, unless Bethesda decides, "We've made enough money off the TES series, lets just end it here."
Probably true, but not for any sort of logical lore reason, rather, it's simply because putting guns and cars into the game would dramatically alter the feel of the series, and would likely drive away the current fanbase, not to mention new players looking for a good high fantasy RPG might be put off somewhat by their being guns in their fantasy.
There's a reason that most magical cultures in fiction are not technologically advanced as well. If you've got magical staffs (staves?), spells and enchantments, what exactly is gunpowder and machinery needed for?
By that logic, if you can just burn someone with magical fire, what's the point in using a sword or bow? And why would you need bridges to span rivers if you can just walk on the water or levitate over it? Why would you need stares if you can just levitate up to your room?
That sort of argument falls short because it fails to take into account one thing, any given fantasy society probably uses a fair amount of things that they wouldn't need if they can just use magic for all their needs, some settings will try to justify this by saying that not everyone can use magic or anything of the like, yet if that is the case, then those people who can't use magic would want to improve their technology so that they could do things they can't do at the time. Other settings will just offer no explaination at all and expect audiences to just accept it because of the MST3K Mantra. It's hard to say if the Elder Scrolls falls into the latter category or if it's just gameplay mechanics that allows a simple peasant to use some spells, at least as far as I know, since I haven't read the novel, maybe that provides a more accurate representation of how pravelent magic use is in Tamriel, and how much it effects the daily life of average people.