I wonder whether the disappearance will be explained to us in Oblivion.
And by in Oblivion, I actually mean in it. If you're ever noticed whilst playing Morrowind that Daedra Lords always have Dwaven weapons then you'll understand why I think the Dwarfs might just be in Oblivion.
I doubt it, Besthesta has always been vague about previus events. Leaving it to you to decide what really happened. Besides, all of the Daedra have their own plane of Oblivion to rule, so there is a very slim chance of seeing a Dwemer in Oblivion.
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The Sun and Moon transform day to night, but what transforms the mind? The best techniques are passed on by the survivors.