Given that there are some rather tall volcanoes in the world, going a bit bigger wouldn't be a bad idea. I believe that Red Mountain is indeed the tallest point in Morrowind to boot, so giving it a bit more vertical height doesn't seem like too much of an issue. I understand where you're coming from though. Given that Vvardenfell (and more importantly Red Mountain being it's center and all) is the highest point on Tamriel, I think giving it more vertical value would be a fun, if not interesting idea. I say this because I remember how the journey to the throat of the world was, and I think that a mod that does something similar in Morrowind for Red Mountain would be interesting. Imagine a difficult journey, hindered by the winds (someone could make levitation and massive jump spells super dangerous or something) and the difficult terrain. An epic saga in it's own right that will tax even the most prepared player to their limit... that's just me though.
Out of curiosity, do you know a lot about geological stuff in general? Just curious is all. I've always been fascinated by such things, even though I've never put the time into study them.