Maybe they all teleported out; or maybe they took a boat, but the better answer is - for the moment - they all died with old Tamriel.
Divayth Fyr, dead? You must be smoking the crazy pills.
I was there, I saw it with my own eyes, the cliff racers can testify to it.
The magma swelled, the oceans boiled, waves of earth and molten lava swarmed towards the Zafirbel Bay. City after yurt fell until it was upon the doorstep of the grand plant that is Tel Fyr. The elder mage watched with peace as the infernal eruption neared his home.. and then it stopped, for the mage had opened his eyes. No spelled was uttered, not a wrist was flicked, twas the sheer beauty of his aura which stopped short the RaGada gods of soot, the color red and seismic waves (for only the Raga have such silly gods). "A pimpmer longer-lived than gods, tis not within our loins to raise ourselves against such a one."
To this day all of Vvardenfell lies in waste save for the island oasis of Tel Fyr which even the very volcanic earth dared not disrupt for fear of the Psijic's rage, for afterall, if the Psijic can dissipate whole islands, what would they have done to spirits of this land should it disturb their meditation?
As for the dwarf, I only quote the masters, 'even gods dislike the absolute.'