I write this as an answer to a startling twist that the story of Morowind's Great Houses took in the canon writings after TES3. This answer leans heavily on TR lore, but I think even without it, it could still stand on its own and put sense to the shakey alliance that Hlaalu and Dres created after Helseth's marriage to a Dres lady.
First, An Overview!
The lore about Hesleth marrying comes from a roleplay on the old Bethesda forums. Helseth and an abolitionist of House Dres marry, and as a result, the two Great Houses become one, the slaves are all freed, and everyone is happy! ...until the Oblivion Crisis, at least, after which the Redoran emerge as the dominant power in Morrowind, despite the rosey promised future of the Hlaalu-Dres alliance.
Normally, I would toss this into the bin of lazy writing and warn against not taking fan fiction (even if fan fiction written by the official devs) too seriously. If it needed explaining, the idea of Dres freeing all their slaves when their entire economy is dependent on slave labor is troublesome just by itself, but extending from that, it makes little sense for why Hlaalu, the most progressive of the Great Houses, and Dres, the most conservative, manage to put this wide gulf in their ideals aside to become best of buddies. Even furthermore, why would either House pay much mind to what Helseth and some Dres farm girl is doing, considering the precarious role a High King has in Morrowind's political landscape? Finally, as stated, how did Redoran emerge the ultimate victor, when to all appearances in TES3, they were on their way out?
Instead of grumbling (at least, grumbling a lot), I've gone ahead and written around the fan fiction. This is another fan fiction, AKA a proposal of how we can reconcile all these events together.
The Fall of Great House Dres
This deals largely with TR's lore for Dres, though you could assume some general pieces of this remain (namely that Dres is dying off) without making use of TR lore.
In TR, Dres' story revolves around the secret bargains the Dres made with powerful entities in the past. One of these bargains was with the Hist, where the Dres would exchange politically-troublesome or perhaps ritually-honored Dunmer (or both) with the Hist for Argonian slaves. The hows and whys of this have been discussed to death among TR devs, so I will put a short summary: we don't really know why. This is likely a candidate for a Red Moment explanation, where we write several accounts of what happened, and let the player make the judgements. For posterity's sake, among the alternate storylines suggested have been these: that the Hist is implanting sleeper cells within the Dres ranks which will eventually culminate in the Argonian Invasion, that the Hist care little for the Argonians and they use both them and Dunmer in experiments to create new lifeforms, that the Dres councillors made these deals with rogue Argonian tribes due to the all-around vice of greed, that the Hist tasked the Dres wise women of old with helping them to regulate their soul matter run-off and so entrusted them with the sacred duty of caretaking Hist deviants and their respective Argonians, or finally that no one has a clue and ever can have a clue because the Hist are hopelessly alien.
Whatever the truth behind this ancient deal, it is obvious to anyone that it is not working out so well in the present time. And indeed, in TR's timeline, House Dres will fall apart. The councillors will likely die or succumb to madness. The Argonians are building up to their Argonian Inavsion. The Tribunal, once of the pillars of Dres society, have fallen. And if that wasn't enough, the Oblivion Crisis is sure to come and liberally shake things up!
All of this means that House Dres is on the decline. Civil unrest is rampant, and their economy is in tatters. This sets the stage for House Hlaalu to enter the scene.
The Rise of Great House Hlaalu
Hlaalu is the biggest supporter of Imperial influence in Morrowind. Helseth himself belongs to this House, together with his political connections outside of Morrowind. Hlaalu's progressive image is only slightly marred by their complicated relationship with the Camonna Tong, who are racist criminals on par with the KKK, believed to be the dregs of House Hlaalu who defected when Hlaalu began to seriously support the Empire. This is all well laid out in TES3's lore as well as other canon installments along the way, and is also supported in TR's lore.
We then learn in TES4 and TES5 that Hlaalu continues to grasp at greatness, but eventually end up rather short of the mark. In TES4, we hear how the Great Houses have turned to war, with Redoran and Indoril on the one side, and Hlaalu and Dres on the other side. (Telvanni does what Telvanni has always done: sitting back and watching in amusement.) Hlaalu and Dres being allies sounds familiar, doesn't it?
But what about Redoran and Indoril? We are led to believe that this alliance was in part due to the Tribunal falling, as well as House Hlaalu's plotting for power. The Indoril, in traditional Indoril fashion, did not suffer the deaths of their god-kings lightly, and fought back as Hlaalu expanded their borders and attempted to change Morrowind culture into one more Imperialized. Redoran, also loyalists to the Tribunal, are natural allies of the Indoril, though given their protective role in TES3 and TES5's stories both, we may also assume they jumped into the fray like a parent jumps in to stop a petty sibling rivalry. The Oblivion Crisis eventually renders this Great House war null and void, as everyone has to band together, with Redoran and their martial skills taking the flagship, to prevent total annihilation by the Daedra.
By TES5 times, Hlaalu has become a dead house. The gap in time leads much to guesswork, but we can perhaps believe their fall is due their own greed: shamed by trying to take so much power and then failing, they have been kicked out of the Council and stamped off the face of Morrowind. In their place, House Sadras has risen, and House Redoran has taken control of the rest.
My Proposal: The Alliance and How It Came to Be
With these backgrounds of the Great Houses established, we now come back around to the problem of the Hlaalu-Dres alliance. At a glance, they appear to make uneasy bedfellows. One is rabidly anti-Empire, while the other has been accused of being in bed with it. One has outlanders in key positions of their leadership, and the other enslaves outlanders indiscriminately.
The only thing they seem to have in common is an interest in Morrowind's economy. House Dres runs most of Morrowind's agricultural system. Without Dres, Morrowind would literally starve. House Hlaalu gains most of its power through trade and production of raw goods. To my mind, it was only a matter of time until House Hlaalu turned their eyes on Dres' massive farms with the idea of extracting wealth from them.
For most of Morrowind's history, Dres has easily repelled any such advances by the Hlaalu, and the southern regions of Morrowind have forever been a Forbidden City-like mystery to non-Dres. But during TR's timeline, remember that House Dres is falling apart. Their very existence is at stake, while the Hist, the Sload, and various Daedric Princes nip at their heels. They are in need of a savior. (In TR's questlines, this may or may not be the player.)
This is when perceptive Hlaalu realizes their opportunity and make their move. They offer their help to the Dres, first by relaxing their inter-House warfare, then of charitable loans, then finally of helping to manage the economical interests of the Dres clansteads who have lost their councillors to the Sload. Bit by bit, Hlaalu worm their way into Dres' leadership, including establishing the marriage between Helseth and the Dres councillor (of whom I have conveniently forgotten the name). Just as Dres reaches the peak of their internal convulsions and are firmly grasped in Hlaalu's "helping" hand, the Hlaalu issue a new demand: in order to maintain their good ties with the Empire, they desire to free all slaves in Morrowind. The Dres, already riddled with the Hlaalu as they are, are powerless to disobey. Their slaves have to go. Abolitionists everywhere rejoice: slavery in Morrowind, in Tamriel, has been defeated!
But who then feeds Morrowind? Until the advent of machinery in our modern day world, farming was a labor-intensive process. Neither the Hlaalu nor the Dres are given to magic like the Telvanni, so it can probably safely be assumed that trying to use magic in place of manpower on such a large scale would be impractically expensive or even dangerous. Without their slave labor, Dres farms begin to fall into neglect and then into deep debt. Here and there, the Hlaalu may bail them out, but even the wealthy Hlaalu can't sustain all these farms by themselves.
The Hlaalu-Dres conglomerate are in need of cheap labor, and they can't resort to slaves anymore, at least, not nominally. Hlaalu begins making their war against the other Great Houses, with the political prisoners going to work the saltfields. They also turn inward, increasing their demands upon the Dres until most Dres find themselves in the same plight as those slaves newly freed after the Revolutionary War or as modern day workers in exploitative sweatshop industries: they work hard day and night but can never get out of their debt. They belong to Hlaalu. And the rest of the world, embittered for centuries after being subject to the Dres slaver cruelties, turn their back. Turnabout is fairplay, and all that.
As the story goes, Hlaalu wouldn't get away with this forever. After an uneasy time of convenience alliances and the near-massacres of the Oblivion Crisis, the Great Houses returned to figuring out how to manage themselves after the parental Tribunal had disappeared. In my proposal, the plight of the Dres people is brought before the Council, and Hlaalu is incriminated. For so enslaving their own people for the sake of a dying foreign Empire, they are stripped of their titles, and that is all we shall ever hear of them ever again.
Or is it? In TES5, we learn of a Hlaalu who was grasping at straws trying to gain land and power back from the Redoran now living on Solstheim. This would appear to be an isolated event, a last convulsive kick of the dying animal, except maybe there was more to this than first appeared?
Tying in TR's Lore: Hlaalu's Great Conspiracy
In its lore, TR introduces a new guiding principle behind the actions of the Hlaalu. The Hlaalu, rather than being simple greedy capitalists only after more wealth and willng to lick the feet of the highest bidder, are instead very much aware of the dangers Morrowind faces, whether from Dagoth Ur, the loss of the Tribunal, or the later Oblivion Crisis, and are totally dedicated to defending against them. While Redoran defends Morrowind with strength of arm, Hlaalu defends Morowind in its own way, through negotiation and politicking. They ally with the Empire and take on the Empire's ideals in the same way that Boethiah climbed into the skin of Trinimac to overthrow him. They learned of their enemy by becoming their enemy, evolving and proceeding with Veloth's mandate by forever improving themselves and looking to the future. In this way, despite their Imperialist veneer, Hlaalu is actually the most Velothian of all the Dunmer sects.
Taken in this light, Hlaalu seizing power, starting wars, even being jerks to Dres, was all part of the plan. Land was seized in order to unite the province. War was created to catapult the Redoran into a position of power in preparation of the coming Dagoth Ur and then Oblivion Crisis. After the Crisis was over, the Redoran, seemingly to all but the Hlaalu, who knew better, had united the province. Understanding the power of us vs. them in keeping a society together, Hlaalu then offered themselves up as the martyr, which the rest of Morrowind could rally around: in bringing down Hlaalu, Morrowind became tighter-knit and more firm in their ideals. They defined who they were by defining who they were not, evolving yet again in wake of the Empire.
But, perhaps, if that sounds too rosey and sneaky just to be sneaky, there is also the human element. While the elders of the Hlaalu may have believed full heartedly in the Great Conspiracy, there will always be those who are just trying to make a quick buck or live an easy life even if built on the backs of others. It's unclear how many of Hlaalu were corrupted in this manner. It is also rightfully pointed out, that it is impossible for anyone to predict the future, even when following prophetic scriptures or using magic; it may that Hlaalu never foresaw the Oblivion Crisis, and their vision of a united Morrowind was prematurely cut short by the deathknell of a mad god under Red Mountain, with Redoran just conveniently poised to fill in the gap.
Further Implications: The Argonian Invasion
The story does keep going on. Though Hlaalu may have had good intentions all along, for most in Morrowind, this never came to light. The Dres hobbled along as a broken society, and more punishment was on the horizon: enter the Argonian Invasion.
The Argonian Invasion takes place a few years after the events of TES3 and TES4. It would seem to be a war motivated by justice; Morrowind had traditionally enslaved thousands of Argonians, and now the Argonians were rising up for revenge. It does, however, brings up a question of timing. For one, Morrowind has released all their slaves post the Helseth marriage, and unless the Argonians are incredibly vengeful, an attack on all Morrowind just seems petty at this point. It also doesn't explain why the Argonians are only attacking now, instead of many times over the course of the centuries that Morrowind has kept slaves.
I will start with the latter point. The question of why the Argonians are only attacking now is resolved primarily through TR lore. The Dres bargain with the Hist kept conflict between Black Marsh and Morrowind at a lukewarm ebb down throughout the ages. (If you want to incorporate ESO lore, you could say it may have even been thanks to the Dres that the Ebonheart Pact existed.) The only major blip was the Arnesian War, which was caused more by the secret deals being defaulted upon thanks to some blunder perpetuated during Saint Roris' capture and escape. As the Hist motivations are not defined within TR, so this blunder is not defined, but we can assume that after the fighting, the Hist and the Dres again came to an accord that prevented further major uprisings. After House Dres fell apart and House Hlaalu took over, however, the Hist bargains were left to rot. Not being able to keep slaves meant the Dres had no reasons for continuing with the bargain, even if they had the power to do so. This was another default on the bargain, and unlike in Saint Roris' time, there were no powerful Dres leaders and no Tribunal to put a decisive end to the conflict. Hence the terrible war.
Back around to the first point. The lack of slavery still culminating in an Argonian attack can perhaps be shakily resolved at taking a look at other world events going on at the same time. The Argonian Invasion happened shortly after the moon fell onto Vivec and triggered a massive eruption of Red Mountain. Timing the attack with this event was an act of opportunism: Morrowind was at its weakest. Even here, the reasoning is shakey though, as one then questions why the Argonians did not try attacking at other weak points during Morrowind history, such as the Armistice, or if Red Mountain erupting had something to do with the Hist and their wacky soul metaphysics, when Dagoth Ur awoke or when the Nerevarine arose.
My proposal and TR lore adds the reason for this timing: if the Dres and the Hist were ancient allies, and the Dres perceived themselves to be picked on by the Hlaalu, it may stand to reason they would turn to the Hist in order to overthrow the Hlaalu. Hlaalu at this time would have been on the wane: the Oblivion Crisis destroyed any attempts of their taking over the province, and the rest of Morrowind was beginning to wake up to the fact that Hlaalu did not make for a palatable governor. Hlaalu would still however be firmly entrenched in Dres lands, as the Dres were the weakest of the Great Houses at this point, and still nominally Hlaalu's ally. As Hlaalu began to feel the squeeze of their losing war, so the Dres would feel the squeeze even more, being the proletariat to the Hlaalu bourgeosis. The Dres then turned to their old allies for help. (Even if TR lore has not won you over and you believe the Hist and Dres never allied, you can still go by that old adage: the enemy of my enemy is my friend.)
This version of the Argonian Invasion's cause would clear up more than just its timing: because the attack would have been targetted more at Hlaalu than at Dres, the Hlaalu are extinguished, as we see in TES5, yet the Dres still live on despite many of their former lands being in the hands of the Argonians, as we also see from out-of-game sources. If the Hlaalu love outlanders as much as they say they do, you would have expected the roles to be reversed here, with the Argonians steering clear of Hlaalu lands, while wiping out the Dres entirely.
I can imagine it happening: a group of renegade Dres travels through the dangerous Black Marsh to speak with the Hist, then sacrificing their lives and even their sanity to convince the Hist to start the war, which in turn could doom the very people they were trying to save.The story would be worth a book, I think, but maybe I'm just tooting my own horn at this point! Still, one can imagine the hardships this group from the most hated of Houses would have to endure and the moral dilemma of who is the true victim and who is the true perpetrator that is posed to the reader. I love it when a story can bring up uncomfortable questions that may have relevance to current world problems like this. Things like: should the descendants of slavers bear the guilt of their ancestors? Can such a people find things to proud about in their checkered history? What is lost when a society, rightly or wrongly, is labelled as evil and destroyed? And what is the responsibility of outside nations to help those being taken advantage of by their own leaders? If I had my way, this storyline would further be carried out through such projects like Beyond Skyrim: Morrowind, where the player learns of this complicated history and gets to choose what happens to the Dres and Argonians of the future, so playing out these very questions to their conclusions.
Ah, well, I can dream, right? In the meantime, take it for what you may: my proposal on the inner workings of the Hlaalu-Dres alliance, and the continuing history of this part of the Morrowind province.