Is it me or the red mountain seems to be a little too close?

In morrowind the red mountain was toward the center of vwardenfell, nowhere near the coasts toward solsthiem....

It is in the centre. It's just very large.

It seems unreal.

Solstiem is also scaled down, Beth doesn't exactly have a set size for Tamriel.

It's not too different than what Morrowind would have been had the technology been adequate to support a mountain like that. Solstheim and Vvardenfell had to be scaled differently than Skyrim/Cyrodiil because of the size as well.