http://www.imperial-library.info/interviews/skelm.shtml
The first to see him was the Shop Foremer, Kagrenac of Vvardenfell, the wisest of the tonal architects [Mechanists - MN] Do not think as others do that Kagrenac created the Anumidum for petty motivations, such as a refutation of the gods. Kagrenac was devoted to his people, and the Dwarves, despite what you may have read, were a pious lot-he would not have sacrificed so many of their golden souls to create Anumidum's metal body if it were all in the name of grand theater. Kagrenac had even built the tools needed to construct a Mantella, the Crux of Transcendence. But, by then, and for a long time coming, the Doom of the Dwarves marched upon the Mountain and
they were removed from this world.
http://www.imperial-library.info/tsomw/mw_18.shtml
I have no idea what happened to the Dwemer.
I have no sense of them in the timeless divine world outside of mortal time. And, in fact,
if I did believe they existed*, I would be in no hurry to make contact with them. They may, with some justice, hold the Dunmer race responsible for their fate. My intuition is that they are gone forever -- and that is perfectly fine with me."
*Implying he doesn't believe they exist.
Emphases all mine, of course.
Anyways, the Dwemer [!]ed out of existence. The question is whether that was their intention.