Without getting all technical and listing reference after reference in detail, I will just be giving quick simple details about my theory on the Dwemer.
We all know that the Dwemer are pretty much gone with the exception of one known Dwemer that can be found in TES3 Morrowind, but they too, cannot give any answers to his peoples whereabouts, but he does give some detail on how he did not share their mysterious fate.
Where did the Dwemer go?
That is the biggest question that many still to this day ask when it comes to the Dwemer, they were one of the most Technologically advanced races on Nirn.
We know they did not worship any gods directly but have made deals with the Daedra and traveled throughout the Oblivion Plains.
In Skyrim there is a Man that can tell your a Vampire and even tells you that they walked through Oblivion Plains and seen Dwemer during his Journey's, are they the same Dwemer from Nirn, I honestly do not think so.
But here is my Theory on the Dwemer:
I believe the Dwemer on Nirn were honestly sacrificed and those that were in another realm were spared that fate.
In Skyrim we do the Quest Arniel's Endeavor in which when completed we will have the Keening and a Special Soul Gem, and what does Arniel do?, hits the Soul gem and vanishes, then what happened? We can summon his shade.
The thing is, the Shade reminds me of the souls from the soul cairn, and so I believe that Arniel sent himself to the Soul Cairn, now you may be saying something like, but hes not in the soul cairn when we check, I believe that since he vanished as a whole and not just soul trapped, that Arniel actually became part of the soul cairn instead of a resident of it.
Why is it important to know about Arniel's fate?
Because when the Dwemer disappeared, they used the Heart of Lorkhan instead of a Soul Gem, so I believe that the Dwemer on Nirn we actually all taken to be part of a new Lorkhan or become part of his new body anyway.
Lorkhan has been known to be deceitful and a liar so I would not put it past him to fill the Dwemer minds with thoughts of Immortality and then use them for his own gain.
I believe other Dwemer exist in other realms since they were known to travel and if the reason for what took the Dwemer on Nirn was only able to take the Dwemer on Nirn and no where else, then there must be Colonies of Dwemer in other realms, all looking for immortality.
But do believe that the Dwemer in the other realms do not care about finding out about the Dwemer on Nirn, remember, the Dwemer were more secretive and suspicious of others and so just showed no interest in outsiders unless it benefited them.
But that is what I believe happened to the Dwemer on Nirn, its not that they went somewhere to settle, but instead were taken and Enslaved to be part of Lorkhan since we know Arniel's fate was to be a slave to the Dragonborn as a shade (A shadow of ones former self)
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