Geez kid, you need to study political history. There is such a thing as a PUPPET GOVERNMENT (ex.: Italy during the second half of WWII). The Thalmor and Empire signed a "treaty," which officially ended the war. Unofficially, it secretly gave the Thalmor control over some sector of the Empire (don't know this for sure, but it's sound logic). Since then, they've managed to wrangle away more power.
I don't see the Empire-Thalmor relationship like the Germany-Italy WWII relationship; I see it as more of how the Allies defeated Germany in WWI and the signing of the Treaty of Versailles similar to the Concordat of White Gold. However, no one knows if the Empire is under Thalmor control or simply giving in to them to prevent an invasion and occupation.
Because the Empire won't fight them. Worse, they'll fight for them if asked.
Hmm, I guess that makes sense. Is the Empire biding it's time though, or are they truly crippled to such a state that they won't ever oppose the Thalmor again?