I don’t think that the driving the empire from Morrowind ever happens in game, but maybe that’s a concequence of the Red Year which in turn is a concequence of the Tribunal losing their power because of the ending of the main quest.

The Tribunal where losing their power anyway, but I suppose that Dagoth Ur could have kept Bar Dau in its place if he’d won, but then everyone would have been transformed into a corpus zombie instead.

The Red Year isn’t part of Morrowind lore, but “what is going to happen with Bar Dau now?” is kind of an open question at the end of the game so it is an event that absolutely builds on things set up in Morrowind