Considering that, according to Annihilation, the Imperial forces are "in full retreat across the galaxy", having third factions mingle in all the fighting might be what the Empire needs in order to get strong again.
Then again, that would probably only work if the Empire stayed out of this stuff, which they obviously won't because of faction balance.
Playing through the game it seems that the Repulbic & Empire are in a bit of a stale mate at the moment. The Republic dealing with Separitists and the Empire dealing with Sith infighting. The treaty is obviously preventing full scale war as well. I would be interested to see what the return of the Emporer would do for the Empire, perhaps finally focusing the Empire's efforts which is bad news for the Republic.