It would be a huge disservice for Bethesda to have put out Shivering Isles just to say, "Well, this didn't happen." or, "It was some nameless npc, not the Champion of Cyrodiil." Letting people get invested in a story just to rip it away from them is a terrible decision.
So much so in fact that it'd be a bad business move. I'd definitely think twice about purchasing future expansions.
if your Champion of Cyrodiil became Sheogorath you want it to be mentioned, so we did, but not everyone did, so we aren't going to say that it's a solid fact. Like I have said countless times before, the hints are a if / if not kind of thing.
It most certainly doesn't matter what you, or I, or she did with their specific characters. Story is story and continuity is continuity. If it isn't kept, the story falls apart. For instance every Nerevarine I played was an Orc. I'm certain the very idea of a non Dunmer Nerevarine is abhorrent to most players. And I'm certain if Todd looked at my character he'd think, "That's wrong."
And I've long since accepted that. The story moves on without you, the player. It's impossible to please everyone who buys the games and expansions. The only logical course is that events happen and if they're referenced to, they're canon.