Fable 2 and 3?
Oh right, I forgot about those. Probably because they're not on the PC, at least not yet. And I'm quite looking forward to F3, actually. It'll be like a breath of fresh air. Too bad it's a Molyneux brainchild. The man's even worse with the hype than Bethsoft and the last game he's made that was genuinely good was Populous. We'll see.
Still, two games (well, one game and a sequel) isn't very many.
They've got magic I guess . It may be something to do with constant war with the Empire and Gods(Aedra(sort of) and Daedra) and now dragons, perhaps stagnating development.
War doesn't hinder development, it drives it.
But gunpowder weaponry and industrialisation of some sort would probably mess the lore up a bit.
You mean more than the last three games have already? In Daggerfall you had the Warp in the West, which pretty much turned the entire region upside down, in Morrowind the three immortal god-kings that've ruled that part of the world got stripped of their power (and two of them got croaked), and in Oblivion the whole empire's gone tits up. Bethsoft put a worldchanging event into every single game they make, I don't think gunpowder would stand out too much in this respect. Plus it'd open up a number of new possibilities in terms of both gameplay and lore development.
The whole series until now has happened within a relatively short timeframe (the life of a single emperor, who was pretty old already even in the first game). If they're going to start jumping hundreds of years forward, I think there should be some change in the world.
Wouldn't including gunpowder actually go against the lore? In the TES universe (should that 'the' be in there?) men and mer are devolving and becoming less powerful and knowledgeable with each generation. In the beginning all that existed was Anu and Padomay, but then the universe was created (a bunch of other stuff also happened that I missed out) and the Aedra were made. They split into Aedra and, slightly less powerful, Daedra before creating Aldmer. Aldmer devolved into the Ayleids and so on until we have the current races.
Therefore technology cannot advance, in fact in a few centuries it will start going back towards stone-age tech.
So where do the Dwemer fit into this? They had advanced tech, in a lot of ways even more advanced than what we have today (robots that function for thousands of years with no maintenance, anyone?).