Overall, I think that having the Morang Tong as an enemy faction is a good idea, especially since you mentioned that they could have spread as well after the eruption. I think that they would try to go to Elsweyr, Hammerfell, Black Marsh, and possibly Valenwood. Elsweyr and Hammerfell because of the hot weather and climate, Valenwood because they might find refuge with fellow elves, and Black Marsh because it's close to Morrowind... scratch that part about similar climates.