[Disclaimer: These are just some ideas and interpretations I wanted to share, as a means to discuss concepts and inspire other users/projects, i'm not proposing or suggesting anything, if anything these will be just my opinions, though I invite everyone to correct me if something I say is factually wrong according to Morrowind-era official sources]

After reading this very inspiring posts "https://www.tamriel-rebuilt.org/forum/marks-grand-telvannis-redo-proposal" full of interesting ideas and a lot of potential, and realizing that a telvannis redo is planned for the future, I wanted to give my view on the topic and share my ideas about it.

First of all, I really like the idea of having regional councils. The arbitrary separation between the mainland council and the vvardenfell one seems very forced to me, especially since it's never mentioned in the of game or anywhere else. Not only that, but the idea of all telvanni mages sharing a unique council, as mentioned by the author, is indeed not very proper of them.

But moving on to Port Telvannis:
My idea for the city is that it's an absolutely ancap (anarco-capitalist) city, but with wizard lords instead of megacorps, no ruler or any kind of centralized authority, it's a ruthless and chaotic city where you can find any kind services you want. The whole island is in fact all covered in giant mushroom towers, arranged randomly and unorganized, just like an organic forest. This situation is due to the fact that most young mage-lords aspirants seek fortune and ascension in the rankings of house telvanni trying luck offering their service to some of the many (MANY!) mage lords that control the island, to a point where it's almost overpopulated with enthusiastic and energetic mages; in fact many important and well established telvanni mages started this way, as mere servants providing services in other lord's mushroom towers (think about the alchemists you could find in vanilla's mushroom towers); is the main place of study for all young telvanni, since they lack any kind of school institutions, and an excellent place for gathering contacts and initialize themselves in telvanni politics/affairs. Mage towers act like corps, they provide private services to get money, but instead of using this money to buy rival's territory, they raid them using force. Because of this situation, the whole island is a constant battleground of snaby politics and assassination attempts. Ironically, and contrary to what one would believe, this makes port telvannis one of the safest places in the whole telvanni region, being full of magical security and having guards everywhere; not to mention the fact that political conflicts rarely affect normal citizens, making it not a bad place to live (not as good as an imperial city, of course, but still better than the average morrowind settlement). However, this does not mean the city doesn't have it's own problems. Security is only granted as long as people pay their fees to the local mage lord, and sometimes they can be very abusive, acting as little more than a mafia or feudal lord. Poverty is not rampant but is certainly mounting, those with no magical abilities of its own can't offer their service to the mage lords, having only two other options, either becoming a guard, or dedicating their life to commerce, and while mercantilism is very well established, it's still hard for non telvanni, which like having the monopoly of commerce in their dark hands; because of this, an underworld of crime has formed in what already was a very messy city. Even outsiders notice an alarming contrast between the different social classes of the island, of which they are only two basically: those with magical abilities and live in the mighty mushroom towers, and those who don't. They act, think and dress almost as if they were from different worlds, as if these were two different cities intertwined.
Therefore, people in Port telvannis can be classified in the following hierarchy: the mage lords, their servants (kind of a noble class), guards/mercenaries, merchants, commoners, and the living scum (bandits, thieves, outlaws hiding from imperial law, etc.). Port telvannis is also the port from which most telvanni pirate ships that infest the padomaic sea sale (that's a document for another occasion).
Slavery, necromancy and daedric worship are common practices in the island, in fact some estimate that in Port telvannis you can find more daedric temples than those dedicated to the tribunal. Aside from Tear, this is basically one of the few places you can see sloads in Tamriel.

Ideally, port telvannis wouldn't have any council hall, just constant warfare (maybe a faction war kind of area, but I know that would be hard to do).

I also have a different take about the dust adepts:
Contrary to Mark, I never consider them as a different brand of telvanni wizards, but rather a unique magical practice or school that is native to telvanni territory, that would explain why in vanilla morrowind the dust adept helm is a very common mercenary apparel in telvanni lands, i'm truly convinced that was the intention in that regard. About the banned practice itself, is probably necromantic in nature, that's why it developed under telvanni territory, there are no ordinators or temples there. In my head, it would be all about using ancestor's ash that is stored inside giant but portable pots, Gaara style, to attack with it or conjure ash minions. As if they were commanding the souls of their ancestors within the ash to make it move and change form.