Personally, I like to think Beth left it open so that WE can decide. Feels rather sour to have a character you had either your current character (or an old character) kill, only to come back the dead somehow.
I'm looking at YOU, Neloth!

He's a 4000 year old wizard who could create portals to Oblivion with ease.
The question is why WOULDN'T he be alive?
I don't know, but everytime I see you outside Morrowind Modding sections, I nearly jump out of my seat.