So basically, we are made to believe that as an act of generosity & kindness, the High King of Skyrim seceded Solstheim to the Dunmer so as to establish a safe-haven for refugees in the Red Year's aftermath. While I do understand that Dunmer flooding into Skyrim(& Cyrodiil) could've pushed the High King to give them a new home in Solstheim, do you guys actually buy that a sovereign just gave up (financially key) territory to "spare his people the blight of living with Dunmer"?

I can see how the matter was overlooked by Imperial administration, considering the Stormcrown Interregnum, but how believable is this secession of (what I at least consider) important territory? Judging from every official geographical rendition of Tamriel I've seen, Solstheim is basically northeast-ish of Blacklight (northwestern most Morrowind), so it being under the High King's control is evidently a financial gold mine, which I'm willing to bet has contributed vastly to whatever prosperity Skyrim enjoyed before that.

It just doesn't make sense to me. Under the Septim Dynasty, Skyrim was perhaps the most pro-Empire province (outside Cyrodiil obviously), while Morrowind was the perhaps least Imperial controlled province (along with Black Marsh). Why would the High King, at such an early stage, completely secede territory so economically beneficial just to avoid "having so many refugees"? Granted that refugees may not make for a scenario favorable to economic booms, it is still strategically key to the Empire & what nuisance of secession did Skyrim's nobility have at that time (more than a century prior to the Great War)?

You have the wrong idea of Solsthiem.

It was never financially profitable. It's sole export industry was the Ebony mine in Raven Rock, as there was little else on the Island of intrinsic value. Indeed, Fort Moonmoth was constructed to prevent pirates from using the island as a staging ground, more then guard the island proper. Most of which was a Ice Hell of Tundra wasteland and hostile natives.

The High King giving Solsthiem to the Dunmer was a natural state of affairs. House Redoran had petitioned the East Empire Company to allow Dunmer colonization in Raven Rock, and during the Oblivion Crisis (Since no Oblivion Gates opened on Solsthiem), the Legion garrison was recalled to Cyrodiil and House Redoran forces there after provided security until the Red Year, when the eruption of Dagoth Ur (By the 4th Era renamed Mount Vvardenfell) wiped out Moonmoth and the Imperial Garrison.

Even prior to the Red Year, Ash storms from the churning volcano were sweeping the island, resulting in the creation of the Bulwark and generally discouraging further Imperial development. By the time the Ebony dried up, Solsthiem had been in the defacto control of House Redoran for almost a century.

The High King lost nothing by giving up Solsthiem, except backwater kinsmen who entertained funny notions about something called the All Maker. But they were the Dark Elves headache now, not his.

Because it wasn't some great money fabric but an Island with a group of primitive natives and dried up Ebony mine. High king graciously giving island to Dunmer wasn't some big gesture if help. Dunmer were already there en mass and High King decree wouldn't change much. So he just gave financially worthless island to the large group of people who already lived there, and worded it in fancy speak.

The island wasn't financially key territory when the High King gave it up. The East Empire company was in trouble, the ebony mine was played out, the Imperial fort was in ruins and all the troops dead, and due to the volcano, nearly everything on the island was in ruins, needing repair/replacement. The High King was probably happy to offload a white elephant and the cost of its upkeep to someone else.