Board Thread:Skyrim/@comment-11444045-20131003032625/@comment-173.25.213.5-20140305214130

As with some of the lore on the Falmer, the Dwemer once made the Falmer eat poisonous fungi which may or may not have contributed to their blindness, they could have made their slaves eat similar fungi to control their behavior. Because we all know that slaves generally out weigh th population they are serving, I.E. why the Dwemer may have disappeared because they were wiped out by their slaves because they stopped eating the fungi

obviously speculation on this part but it could be one scenerio