I'll be honest - Ylaruam seems a bit shoe-horned into Mystara. It's further north than Karameikos, Thyatis and Darokin, yet it is hotter in climate. Furthermore other nations are lush with vegetation, or at least have enough rainfall for plains and agriculture. The forests of Karameikos, the grasslands of Thyatis and the lake-filled valleys of Rockhome all strongly contrast with this parched desert that is sitting right next to the sea. It seems very abrupt, perhaps even out of place.
However, there is a major saving grace that I stumbled across on in Gaz2: The Emirates of Ylaruam, on p8 (bottom of the left column):
Third, the official religion of the [Nithian] Empire, the Magian Fire Worshippers, revered powerful beings from the Elemental Plane of Fire. Conflicts between these fire beings and beings from the Elemental Plane of Water resulted in an imbalance in the availability of these elements in this region, intensifying the effects of the increasingly arid climate...
The idea of a magical aura, residual from the time of prolific elemental magic, that increases the heat and reduces the water, is something I can be comfortable with. This is not a desert because of the laws of nature, but despite the laws of nature. This is magic on a national scale. In my head-canon this can sometimes be seen by those in the most parched areas of the desert at sunrise and sunset - the colours are unusually vivid, with streaks of bright orange, peach-pink and golden yellow across the sky even when there are no clouds, as if the sun is setting the sky itself on fire.
The gazetteer also mentions how the River Nithia was driven underground by geological upheavals, thus precipitating the collapse of the Nithian Empire that relied upon the river for agriculture, transport and fishing. Although in the gazetteer this is given as a purely natural phenomenon, I would not be surprised if elemental earth magic was involved. Perhaps the Nithians' water supply was deliberately cut off? Or maybe the forces wielding the earth magic had other reasons for causing the upheaval, and the disappearance of the Nithia was merely collateral damage.
The river Nithia was not totally destroyed - it still flows underground. Its presence can be deduced by the way the oases in the desert are continually replenished despite the aforementioned aridity. Ylaruam itself, Sulba, Tel Al Kebir, Abbashan and the like all rely on this water welling up from the ground. Is it possible to access these underground waterways? Yes but if you are trying to get there through an oasis, you need to be able to breathe water as you swim down to the aquifers, at least for an hour or so. You had better hope that the cracks in the rock through which water flows are wide enough for you and your equipment. It is possible to find more airy ways down to the Nithia, but since these caves and potholes do not have water at the surface, it is not obvious to any travellers or explorers that this is where they may lead.as I noted previously, is set in the deserts of Ylaruam. That body of water in the huge cavern that the underground city is on the shores of? That is a branch of the now-subterranean River Nithia. Follow it downstream and see where else it leads - I dare you.