They make Dark elves live in a Slum and barley tolerate there existence, you said you did an Empire playthrough, so maybe you caught the part about the Imperial Yarl of Windhelm saying he was going to make sure Dunmer get treated better?
Just gotta check here... but have you ever seen a real slum?
The "Gray Quarter" in Windhelm isn't all that bad. Logistically, it is awkwardly placed, but the buildings are spacious and in good condition... so it isn't so bad. In fact the worst that goes on there is a few of the absurdly racist locals picking fights due to their own overzealotry. A factor which one would expect to clear up quite nicely after the civil war situation is resolved.
If anything, the Argonians in Windhelm have it worse.... but then they're fine if you throw them in the water, so who cares?
Who's invading? The Empire has been in Skyrim since it started.
Same way they were in Morrowind? Unwelcome, domineering foreigners... And now they're just lap-dogs to another power. They might have had their claws in Skyrim a long time, but they never stopped being the foreign invaders.