In a grotesque nutshell, my idea is thus: the Ayleids, once the dominant population of Cyrodiil, had, after their overthrow - and besides assimilating into the Alessian state or fleeing into Valenwood - either wholly became the Goblin community in Cyrod or were absorbed into it.

My only real hard semi-firm evidence is that http://www.imperial-library.info/content/morrowind-wild-elves regarding the 'Wild Elves', the closest living descendants of the Ayleids, seem to adequately describe Cyrodiilic Goblins.

Though, were it true, I can't imagine that the Imperial Propaganda Machine wouldn't seize on such a tasty little tid-bit of Elf-bashing.

It's an interesting idea. Could you quote the bit you think points to goblins, though? I don't see it.

I'll hesitantly assert that http://www.imperial-library.info/content/morrowind-wild-elves does not support your theory, though. As far as I know there's no clear date of when that was written in-character, but we can assume it was after 2E 227. No telling how long after, but I'll postulate only a few hundred years. Maybe it's misled, but I feel that information on Ayleids would not be as carefully preserved as other knowledge in Imperial libraries, so it would have to be fairly soon for the author to have access to the records of that Ayleid and his writings. Furthermore, the elf in that text lived about three hundred and fifty years - obviously, we don't know how he died, whether that was a typical lifespan or not, but still, we know that Ayleids in good care live at least three hundred years. So it doesn't seem like there was enough time between 2E 227 and 3E 433 for a long lived group of elves to blend indistinguishably with the goblins of Cyrodiil.

I'm not saying it's impossible, just that there's no evidence. (Although from your title, you already know that.)This is TES, after all. Some Aedra or Daedra could have bloody well cursed the remaining Ayleids, akin to that of the Dunmer, or something like to the change of the Orsimer.

Speaking of Ayleids, here is a link to an Wild Elf performing some http://www.youtube.com/watch?v=4F-CpE73o2M&list=FLetc7PkvQcyqxx_ED7-mExA&index=76

Totally captures the essence of this lost and nigh-forgotten people.