What's your headcanon about the player character being able to understand most people?
I always think of Star Trek, which mostly uses universal translator technology to wave away the fact that there are millions of different cultures interacting.
Personally I think it's easiest to assume that Dunmer are mostly talking Dunmeri, especially the Ashlanders, and maybe the occasional words that are emphasised as not being translated is for effect?
The alternative is to assume that most characters speak good Tamrielic, which doesn't make as much sense to me personally?