I understand that this happened around 4E 5 .... the events of Morrowind took place in 3E 427
The events of Skyrim take place in 4E 201 (I assume the 201 is the year number... so that would mean that we are playing Skyrim 200 years after the eruption of Red Mountain, right?)... There's some dispute as whether or not the eruption is still spewing noxious ash and gas onto the land, or if it's all settled... I assume 200 years would be at least enough time for the Dunmer to begin rebuilding and cleaning things up? The wiki mentions that there was a mass exodus of Dunmer into Skyrim, and that many of them are returning to Vvardenfell to rebuild... which would indicate to me that the land is at least habitable now, 200 years later.
Anyway, my issue is this... Morrowind, specifically Vvardenfell, is an awesome place. Why'd they have to destroy the entire area and make it uninhabitable? Seems like a pretty drastic lore choice.