You mean the text http://www.imperial-library.info/mwbooks/spiritofthedaedra.shtml, which explicitly states:
I'll admit I neglected the source, it doesn't change anything though. That text is written by a Dremora in the service of Dagon, the 'huntsmen' in Battlespire (hence the whole "How We Think About Man" section), his perspective is limited. Chances are he doesn't have a clue how things work outside his clan, or at most Dagon's sphere.
Furthermore, I think its safe to say that the title of the article can be taken literally. When it says
"We do not die. We do not fear death.", its talking about the spirit not dying, not the body which does indeed die. In the same way, in can be inferred that the line
"We are not born, we have not fathers nor mothers, yet we have kin and clans." is likewise to be taken in the spiritual sense, meaning that their spirit was never born or created, they simply sprung from the Aurbis during the beginning time. On the other hand, their bodies do die, and they have to get a new one somehow.
In the same text you'll find it stated that
"Destroy the Body, and the Animus is cast into The Darkness. But the Animus returns." What it doesn't state is how the Animus gets a new body upon its return. Almost everything in the Shivering Isles (Grummites, Baliwogs, Elytras) come from eggs, so as I said, I don't think its beyond possibility for the return process to have been augmented to use this as a tool for re-entrance. I'm not saying its the norm across Oblivion, but for the Shivering Isles it seems that it is...
And also if you want to think about it, why do Dremora/Golden Saints/etc take on forms with sixual organs in their own realms? Sure when their on Mundus you can argue that they do it for appearance sake, especially when dealing with mortals, but why do so in their own realm? Granted, this can probably just be attributed to game design...