I may have misspoken. I'm not eloquent enough to put it into words myself, at least not without ending up saying something else entirely, but I just think it would be disappointing for a Morrowind LP with a great story to suddenly morph into something very different. It would be like finding out at the very end of Game of Thrones that Darth Vader was somehow pulling all of the strings.
A better way to say would be after finding out that the Game of Thrones world has been a planet in Star Wars the whole time, you look back and see clues that are completely obvious in hindsight. It doesn't make it any less jarring, simply because the premise you thought you knew and knew you loved has been consumed by something else.
In retrospect, I think someone is indeed pulling strings, but the most obvious candidate would be Azura. She seems to have much more of an influence in this world than usual. Of course, that might be too obvious.
Bear in mind the ponies theory can be correct without literally meaning that MLP canon is directly involved. As per the original wording of the theory, they may simply be patterned on MLP characters, rather than due to those characters themselves playing Morrowind. As I said, this may be a product of whatever metaphysical process put Michael here in the first place.
Looking over the evidence, another possiblity arises: this world might in fact revolve around Michael. Not in the sense that he's the most important person to culture or geopolitics, but metaphysically, with lots of emphasis on the "Meta". Most of this evidence comes from Vivec. From his point of view, Michael literally came into existence at the start of the narration, just to enter this game. But he also implied the converse:
: "What about the Ministry of Truth?"
: "I'm not holding it up. From my point of view, it's been hovering a couple hundred feet from the ground for the entire history of the universe."
This implies that, from Vivec's point of view, this world came into being (with all the history presumably forming retroactively) around the same time, just so Michael could enter it and be the protagonist of this forum game.
Furthermore (and remember that we only have a single data point for this one), it's still possible that Michael's death resets the world. LB never explicitly denied it, just cautioned us to avoid dying since the implications of other possibilities of what could happen upon our death are horrific. And I'm not eager to get us killed again. But it is a possibility.