Hammerfell won the war, the elves couldn't force them to give up part of their land.
Hammerfell won nothing. They devastated their province and fought to a standstill, either making it too costly or wrecking enough to lose any value.
Just because the Redguards could continue in their lands, doesn't mean the Empire was in any shape after the Battle of the Red Ring.
The Empire would have been in a bad shape that's for sure, but that doesn't necessarily mean they wouldn't have been able to get back up on their feet.
They barely recovered with what they had, you're suggesting they would be able to do so with less resources/manpower and more problems.
Why wouldn't local rulers continue to back up the Empire if the WGC was only about both sides not continue fighting? Everyone would realize that the war was won but with great costs and staying together is the best option.
You've just been draining their resources for ten years, in the last five even more so. After the war even more resources are going out before they're going to see any return. The local rulers look to their own interests first, and you're asking them to continue to support you when you're unable to provide any means of assistance for a very long time.
Look at Skyrim during the Civil War, take away the Talos Ban/Stormcloaks and look at the secondary issues of resources and manpower being drained. Loss of control along the roads, more crime and citizens living in fear of starvation or being killed by bandits and dangerous creatures. Now that is from months of supplying a lot to war effort. What would it be if they had to supply many times more for years? Why should they back you when you're unable to restore one province quickly enough, and draining their resources to do so.
You have little soldiers remaining, resources are scarce and while the local rulers are barely able to handle their own problems you're asking for more. If the Empire had more provinces, okay. But High Rock and Skyrim supporting Cyrodiil for five extra years of warfare, and then more while they try restore order?
The Empire would be weak for some time, but morale and support for it would be strong.
Why would morale be strong? Living in fear, mass starvation, thousands who are homeless, and many people fleeing from Cyrodiil to escape the violence brought about by lack of control. Morale would be fl*ffing low, and the more you take the from the provinces the higher the risk of a revolt over resources than religion.
The provinces are struggling after ten years of supplying war, their resources are again being diverted to Cyrodiil so they can regain control. Which will take an even longer time, that is if they could even restore order with a smaller military force.
With the WGC as it is though, the Empire is both weak militarily and in spirit.
They would be in even worse shape had they continued. If the Empire took too long to recover Cyrodiil, the provinces would take advantage or even directly oppose their rule.
You say the Stormcloaks are a small force, and they are at the start of their campaign but they have support or people who pretty much agree with them in every part of Skyrim.
The Empire has the exact same support in every part of Skyrim.
The Stormcloaks are not exactly at the start, they've been around for many years. Only the open conflict is at the start, and most issues with the Thalmor Justiciars being more recent.
Just because not 'all' of their supporters pick up arms against the Empire doesn't mean they agree with the Empire about the WGC.
Never said they did agree with the Empire if they agree with the Stormcloaks. That would contradict it. Citizens who support neither side do not agree with the Stormcloaks, they mostly fear Imperial/Stormcloak soldiers taking what they want.
Even w/o Skyrim in civil war, look what the WGC did, lost them a whole province,
Hammerfell wasn't even that useful to the Empire at the time, they were too divided and only Cyrodiil/High Rock/Skyrim were prosperous.
After Red Ring they were occupied, after Second Treaty of Stros M'kai they were completely devastated.
The Blades were all but destroyed during the Great War, and they were never an arm of the Imperial Government. Losing the Blades is akin to losing some guild. Sure they were useful against the Thalmor for a short time, but they underestimated their enemy.
Which only affected Cyrodiil and Skyrim, and became more of an issue in the last few years.
and Thalmor agents running around their territory doing whatever they want etc.
They've been doing that long before the White-Gold Concordat. 191 years if they assassinated Ocato.
I'd be more concerned about what they're doing secretly, than openly.Thalmor Justiciars are the least of our worries, them you can at least see by their fancy coats.
Even without the Stormcloaks to indirectly support, the Thalmor would find others.
All of this hurts them in the long run. The only lost the Dominion had was about Hammerfell, they got everything else they wanted out of the war.
The Dominion got a Talos Ban that was so poorly enforced that everyone still had their little shrine to Talos in Skyrim for a good many years without problem.
Mainly, a very weaken Empire, submitting to their demands which sets the stage for an even easier invasion / war next time around.
I would disagree. The Legions on their border would make any invasion harder, and being prepared makes all the difference. Dominion's success in the Great War was largely due to surprise and keeping the Empire on the run. The Empire seems to be preparing for a large Military campaign, even securing their rear by the mentions of a staging ground into Morrowind "just in case".
It would set the stage for an even easier invasion had the Empire went beyond their limits in the Great War. Had they continued you run the risk of them not being able to even restore order in the aftermath.