As to the University thoughts...
I agree that Mor's End is too small to support a large (or even medium) university. But, with that thought out there...what about this.
Sometimes universities have small branches of the same university in different towns. They get some of their support from the main university but are located in far off regions because of specific reasons.
A small university off-shoot could have sprung up in the town due to fact that the magical river sapphires needed studying. At first they could have sent a single profession, but then he requested more people and equipment as other interesting finds developed. This small university could then focus on:
The study of the river sapphires and the exploration of source of their innate magic enhancing abilities.
The study of the warrens below the city. It has attracted a few archeologists to the area.
The study of the silk-giving jelly fish which are unique to this area only. This has attract a mage and a sage.
So the university has a reason for being in this frontier city. The teachers, though from different fields of study, could have combined their library and laboratory resources to save on expenses. A few local experts also give lectures at the school regarding the unique clays in the area, demonstrations on pottery, etc. A dwarven miner also teaches a number of languages at the school: dwarven, orc, goblin, gnome.
The school would then be the right size for the population and would have a reason to exist.
The school could be an old manner with adjorning tower, nothing big and sprawling. Supports 9 academics, 4 servants and 20 students at any one time.
Teachers:
1 gnome wizard (gemcutter) who specializes in the river sapphires.
1 human sorcerer who also studys the sapphires.
2 human sages who spend their time combing the underground warrens for unusual artifacts.
1 dwarven miner who spends his time teaching languages and helping the humans sages out with their archeological digs.
1 elven wizard who studies the silk fish.
1 human sage who assists the elven wizard.
2 human craftsmen who teach at the school parttime, their intent is to find exceptional apprentices in pottery/glazing so that their industry can maintain the high standard that it already has.
What do you all think...anyone want to take this further? Be my guest

gary
yragthecareful
aka. wizardoftheplains