How can you tell the real world from... not the real world?
Is it me, or does that sound like a distinctly stupid thing to do?
Maybe they were trying to give the magisters the middle finger. And they call humans children!
That may just be you. If the Elder One is such a major threat, and the Elves had somehow locked him away or tricked him into the network, then maybe the sacrifice of the Eluvian network was worth it.
That happened like two thousand years ago. What is said to have happened may be completely different from what actually happened. There is no trace left of Arlathan anywhere, not even in the Deep Roads (and this was before the First Blight). It could just as well been thrown into the Fade or another world.
Fenris mentions some Elven ruins, and we find some in the Brecillian Forest, so there are some traces of Arlathan left in the world. The city itself however is gone. But the thing is, that while burying a city under miles of rock and stone is a significant feat, it isn't beyond the scope of probability for the ancient Magisters. However, throwing an entire city physically into the Fade, seems highly implausible, when it almost drained the Imperium just sending in half a dozen Magisters.