Because that's exactly where one would expect to find the beast races. I mean look at Skyrim. Where are most of the Argonians? Being treated like dirt on the docks in Windhelm. Where are most of the Khajiit? Forced to travel around because they Nords won't let them into the cities. So from that perspective, the island really isn't all that bad compared to Skyrim - as far as the beast races go.
Even Skyrim has some beast races scattered here and there - College of Winterhold, bandits, etc.
I just find it surprising, and a little disappointing, that they aren't more represented on the island. I'm not expecting Elsweyr here, but I would expect a few scattered here and there.
Yes but why would they go to Solstheim? The island is off the coast of the Dunmer province of Morrowind so of course it will be mostly if not completely inhabited by dark elves. Like the others said, Solstheim is in an economically bad state so the only real people who would continue living there are the natives but the natives (imperials) gave it up to the dunmer so its theirs now.
EDIT: I actually did run into a Khajiit wizard just outside of Raven Rock at that burnt down farm Lol he attacked me for reasons unknown.