"High elves consider themselves to be the only perfect race. Over hundreds of generations they have bred themselves into a racially pure line, and are now almost identical to one another in appearance. The theory that the High Elves do not reproduce as quickly or as often as humans is false. Rather, and to my horror, they kill nine out of ten babies born to them in their obsession for purity. Alternatively, dialogue in Morrowind suggests that elves are fertile only when they need to be. With the Altmer's armies destroyed, and their obsession with purity, they'd repair just as fast as the Empire. And they don't need to. Military population is just one part of actually winning a war. With the Empire in shambles, it means their economy would collapse, giving them less ability to feed, train, and equip their troops.
inade with what army, now? Pretty sure the Thalmor got [censored]stomped in the latter part of the Great War,
and then driven out of their Hammerfell occupation.
Plus Redguards seem to get HoonDing whenever their independence is threatened.
The same army that has Cyrodiil terrified. If they don't have that army, then Cyrodiil is allowing itself to be torn apart for nothing. More reason to leave the Empire, since staying with them would just have the Dominion rip you apart via spying, assassination, ect.
Edit: Hammerfell doesn't always get the HoonDing. It only manifests under special circumstances: for example, Cyrus was only Hoon Ding during his duel with Richton.