And yet there's over 1,000 years of time after the games start point unexplored by the expanded universe. It doesn't make any since to have the Empire lose this early when we have time for a lot more adventure.
This. Anything can happen.
The Empire can even conquer the entire Republic, execute the leftover citizens and military forces, banish its Jedi guardians from the Galaxy and start its own reign of terror, which will last for the next couple of hundreds of years. And then, slowly, it can be reformed back to the state of the Republic via a chain of micro-revolutions or something.
That's one of the major reasons of devs choosing this particular time period - to have a relative freedom in order to create their own story.
On topic, the current state of TOR end-game (in terms of story) is very similar to classic WoW. In general, the storyline is not really moving anywhere. All we are doing now is disposing of some local threats for both factions here and there.