Yes. Max Mag can make an ult and skill hit harder than the extra 3% damage. Also with higher max mag ur mag recovery passively increases as well as you have more magic to cast more spells to kill something faster.
If we take for example that both races have 40k base magicka pool, before racial passive, Altmer would gain 4k with racial passive involved, and Dunmer would get 3.6k magicka. Not sure how you calculated that 400 magicka difference could compensate 3% fire damage difference, but I am sure your calculation is wrong.
Altmer passives give you following things:
Spellcharge - increase magicka recovery by 9%
Gift of Magnus - increase maximum magicka pool by 10%
Elemental talent - increase flame, frost and shock damage by 4 %
Now, let's see what Dunmer has:
Dynamic - increase max magicka and stamina pool by 6%
Resist flame - Increase max magicka by 3% and flame resist by 2079
Destructive ancestry - increase flame damage by 7% and shock/frost damage by 2%
Magicka recovery sure is nice, I'll give you that, but a bit more stamina and flame resistance is not bad either, don't you agree?
And 3% bonus damage to fire skills is why I would pick Dunmer over Altmer for mDK.