Yeah sure and then Inquisition comes calling, executing thousands for not shooting xenos on sight.
Not...
really? I mean, certainly the Ordo Xenos kills plenty of people for colluding with the Enemies of Mankind, but "and the inquisition kills them all" is a lazy and boring way to look at 40k. Especially since it isn't true in many cases. Rogue Traders are, of course, explicitly allowed to deal with xenos as they see fit, but also non-Puritan Inquisitors have a tendency to ignore or work with xenos. It's not an uncommon, or even unreasonable opinion, that Chaos represents the bigger threat. That's not even getting into pro-Xeno Recongregators and the Xenos Hybris. And, of course, there's still the entire Eastern Fringe. Imperial Law just isn't very authoritative there.
That would actually be a fun campaign to play in 40k - being democratic activists who want to, you know, end all the fucked up shit. It would need careful balancing to keep things going without asshatting with Chaos or something, while avoiding extermination and so forth. Of course it would all go to shit in the end, but it might still be a good story. Best possible result would be getting alive into Tau space and turning to them, I guess. Even if they are mindfuckers, they are better than the other options.
Letting aliens live doesn't have much of anything to do with democracy. But even so, there are democracies in the Imperium. It's a decentralized system, and so long are the tithes are paid and heresy is suppressed Terra cares little what form a planetary government takes. There is every kind of government one can imagine out there.