I like the idea of Argonia, I've always wanted to see it, and later story or expansions could easily go across the bay and into Elswyr and Cyrodil. I think they should look at one of the southern provinces, all the games so far have been set in the North or Cyrodil, it would be interesting to see a southern part of Tamriel.
As a background, the Thalmor could have grown in power and ended up taking over much of Tamriel, however were kept out of Argonia by their impenetrable forests and swamps. This means that Argonia becomes a haven for refugees from the other provinces escaping thalmor persecution, fueling both hatred of the Thalmor and tensions between native Argonians and the immigrant refugees, as well as providing an explanation for the player being of any race, which would be a big problem if the story was set in the Summerset Isles where the Thalmor have kicked out all non-Altmer.
The storyline could begin with problems with the hist or something specific to Argonia, and then that turning into a plot by the Thalmor to disrupt the one province they never managed to invade. Preventing this subsequently turns into outright war against the Thalmor, and perhaps ends up with re-taking Cyrodil and re-establishment of the Empire as well, especially if it turns out the Emperor is also a refugee in Argonia as well.