Could it be that the Telvanni Isles remained? If the Argonian horde conquered the mainland, theres all those bits on the side that would require more difficult planning and terrain than swarming through the familiar Dres swamplands. If you think about the Telvanni, the things they can summon, and their attitude to political upheaval in the past... They may well have shut off their islands to outsiders, charged ridiculous ransoms to allow the richer house dunmer sanctuary, and left the remaining rabble to make their way to Solstheim. The Redoran troops, the Ordinators, the Armigers, the Mages.... For this lot to be defeated by the Argonians, even with their vvardenfell troops gone....The oblivion crisis must have [censored] them up more than we realised.
Though I suppose the cliff racers did drive out the dragons.
Personally i'd imagine they didn't conquear ALL of Morrowind but rather the southern borders up to the crater that once was Vivec, central Morrowind (Vvradenfell) is proably still too uninhibitable to really conquer so it would liely be a neutral zone. I imagine that most of northern Morrowind that wasn't affected is still in Dunmeri hands.
And you have to remember, during Oblivion there where rumors that Morrowind already was in heavy unrest, most of the great houses fallen and conflics with the Skyrim borderlands, they must have already been weakend severely before it happend.
And from a (probably jokefull but still there) in game pvssyr you could overhear the cliffracers where whiped out or at least driven out of Morrowind.
So i think the Argonians probably didn't encounter a lot of resistance, most around the southern Morrowind border probably but deeper inwards i guess resistance was severely weakeed already and they didn't conquer far past "ground zero".