At one point in the distant past, I was a regular at the bethesda forums, and had a chat with Micheal Kirkbride. As such, this is insightful, but totally not officially canonical.
The elves of the aldmeri dominion are more than just 'racist' against the races of men. They want them to not exist, because they consider the races of men to be products of Lorkan, and strongly aligned with that dead, treacherous god. (EG, they are remaining traces of the trickster that caused their race to be mortal.)
There is an allusion to this in the in-game lore, about how the elven pantheons consider the creation of the mundus to be a "Painful fracturing from the divine."
Since "mind-share" seems to have a subtle, but REAL influence over the magical nature of creation (eg, "Mythopoeic forces") and the races of men are so staunchly "pro-lorkan" in their perception of the world, the complete and total extermination of all of the races of men is *required* for the aldmeri dominion to complete its goals of returning mythic aldmeris. *ALL TRACES* of lorkan and his trickery must be expunged, in order for a mythic transformation to occur that will undo the death of the aedric pantheon. Since Talos is really just a "forcibly mantled" manifestation of Lorkan's empty spot in the mythic architecture of the universe, it is only natural that the Aldmeri dominion finds the very idea of his existence, and especially-- his worship--- extremely repugnant.
Elves are very long-lived already, and we are talking a group that fancies itself becoming immortal. As such, they are willing to take the "long game" approach. This is why they are perfectly happy with causing the empire to fracture apart. It isolates all the races of men into easily picked off groups, and by the time they wise up to this fact, it will be too late for them to consolidate power and resist. (EG, why would the sons of Skyrim go and help the Redguards-- et al.)
It is important to remember that the empire is a mythic manifestation of mundus itself, and that it has a ruler that is of one of the races of men is mythically significant-- as is the shape and layout of the capital of the empire, which is laid out in representation of the arubis itself. The subversion of all races to the will of the empire is a myth-echo of the subversion of all the aedric spheres to the governance of lorkan, who bound them together into the mortal plane, Mundus.
The rebellion of the aldmeri dominion against the empire is thus a myth-echo of the rebellion of the aedra against lorkan; The most infamous story being that of how Auri-El reached into Lorkan's body "with more than hands" and ripped his heart out for his part in binding them so. Recall however, how the heart mocked them, saying that they could not destroy it, nor lorkan and keep what they had made, for the world was made to suit the wishes of the heart itself. ("one was made to suit the other.") This caused complete moral breakdown of the aedric armies, who stopped their war against men at that time.--- There is a difference here, in that the elves are insane, and are more than willing to end the world, and themselves, to accomplish what they seek, which is a dissolution of the mundus, and a return of the grey maybe. This echo-narrative has been repeated several times, and always results in the failure of the elven nations. (the most recent was the ayleid wars of the pre-first era.)
It is not surprising that this is happening at exactly the time that the world-eater appears, as it is a mythic manifestation of the world trying to remake itself.
(See also, all the myths concerning the world-eater. In each and every one, he is defeated by some machination. Be it the redguard one, Statkal (oblig:
http://elderscrolls.wikia.com/wiki/Satakal) where the trickster god creates a false-world from the shed skin, which knows only its own hunger-- and the mortal spirits dwelling on that skin need to learn how to survive that hunger on their own--) or any of the others. His appearance and defeat are mythically proscribed. Even the formation of the Aedra themselves from the possibilities of the mythic aurbis follows this pattern.
Ruptga (Tall Papa): Chief deity of the Yokudan pantheon. Ruptga, more commonly 'Tall Papa', was the first god to figure out how to survive the Hunger of Satakal. Following his lead, the other gods learned the 'Walkabout', or a process by which they can persist beyond one lifetime. Tall Papa set the stars in the sky to show lesser spirits how to do this, too. When there were too many spirits to keep track of, though, Ruptga created a helper out the dead skin of past worlds. This helper is Sep (see below), who later creates the world of mortals.
Satakal (The Worldskin): Yokudan god of everything. A fusion of the concepts of Anu and Padomay. Basically, Satakal is much like the Nordic Alduin, who destroys one world to begin the next. In Yokudan mythology, Satakal had done (and still does) this many times over, a cycle which prompted the birth of spirits that could survive the transition. These spirits ultimately become the Yokudan pantheon. Popular god of the Alik'r nomads.
The old empire is likely to fail miserably. The elves will gain power, both militarily and politically, and just when they are about to strike their final blow, (by destroying all the races of men, and doing their own version of the 'tower dance') the myth echo of the first creation will resound, their plans will fail, the races of men will unite and rebel against them, and use their symbols of power to once again forge an empire of myth and magic seated in Tamriel. (this is exactly what happened the LAST time-- See also, St. Alicia. See also, Talos and the stompy robot Numidium, See also, Nordic victory over the Dwemer, who created the Numidium.)
The elves have to create the new mythic construct (White-Gold tower, Numidium, etc), and the races of men must capture it.
Until that happens, the world-cycle has not gone full circle.
I would expect the next major game in the series to focus on that necessary plot.
Kirkbride waxed quite philosphical on this process of mythic re-creation, and intimated that the
"convention" that the aedra were a part of, encompasses not just the known timeline, but *ALL* timelines, and all outcomes, which is why the mocking of the heart against Auri-El has such a profound tone. Literally all possible spirits were present at the "convention."