Dagoth Ur is the ultimate dreamer. For he saw the wheel, the very Tower upon its side and saw that he was I and I was him, but rather than zero sum he knew that he was reality is his dream and reality should become him.
Voryn Dagoth, who would later become Dagoth Ur was of course killed at Red Mountain when he was mortal. And yet due to his proximity to the Heart of Lorkhan he, instead of dying, gained a unique factor. An error in reality as it were. For he was dead, and he soul drifted to the dreamsleeve as many do yet the Heart of Lorkhan also kept his soul alive, and so he was both dead yet alive and both inside and outside of reality at once. He was therefore immortal, as his new soul of I aka Dagoth Ur imposed itself into the dream and "reality" while also being outside of it.
For you see many who would CHIM would see the wheel and would cease to be, as they learn the truth that they are not real. Very few of incredable strong self will such as Vivec would notice the dream, notice that reality is false and thus become gods able to change reality at whim.
But Dagoth? Dagoth was unique. He saw the wheel, he saw the tower all upon it's side as an I. But rather than zero sum and cease to be, or simply notice that reality is false he instead came to a conclusion;
This reality is me, for I am it, and it is me all and all that exists is my own dream and I am the dreamer, and therefore I am the only thing that is real
And so he spread his divine blight. His disease, body and soul. His extension of his own dream, his own twisted reality to be imposed upon reality. All that exists within what he thought was his dream and his reality would become him. The blight would sweep the land, the living would dream of Dagoth their heads filled with mad chants and songs of how they are I and they are HE and their name is Dagoth.
Had Dagoth not been stopped there would after a while be no more reality that exists but that of Dagoth Ur. His own mind reaching throughout Tamriel, throughout all of Mundus and all the Oblivion realms. Everything that was would have become I and HE and DAGOTH would be all.
The reality of all of Elder Scrolls is a dream of the godhead, but Dagoth Ur decided to become the ultimate dreamer and attempt to usurp the sleeping dreaming godhead itself, his own twisted sense of I seeping into everything like a virus, infecting everything it touches.
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