Oh hey, I'm just getting back into Frostgrave and then someone mentions my old thread.
Frostgrave works as a generic ruleset. I didn't have to tweak it at all to represent The Elder Scrolls. Demons work for Daedra along with other similar constructs like say Bonewalkers from Morrowind. Dwemer robots fit into the construct rules too. I mean, frankly The Elder Scrolls as a setting began as a D&D homebrew, so it wouldn't be hard to use it with Frostgrave.
The issue perhaps is sourcing the models. I had to sculpt most of mine. Again however, TES can be fairly generic so you could use anything. Rather you just want to tie the occasional element into the setting so as its not just generic fantasy - i.e. make some terrain pieces with symbol from the games.
Setting wise I went for Vvradenfell post Red Year as the island was in ruins. However yeah, Windhelm, or another ruined city would work. For instance in The Elder Scrolls Online you visit an Argonian one, or there's always Elven and Dwemer ruins (the later is something which I'd like to cover as an expansion to my cave system).
I'll be restarting my TES thread at some point, so you may want to pop into that in a bit.