Their reallocation of resources to the capture of the Imperial City and the reduction of Hammerfell to a secondary front. Vix's article on the Great War is a good place to start. It looks like they found less resistance than anticipated in Cyrodiil and modified their war aims accordingly.
I feel you are confused. Much of your argument rests upon conditions at the time of Skyrim which could not have been known at the time of the end of the Great War.
Skyrim being in turmoil or the Thalmor adopting a strategy of fomenting rebellion may, in hindsight, be consequences of the results of the Great War, but they are irrelevant in assessing who won or lost. If anything, the Thalmor reliance upon subterfuge is a sign of self-perceived weakness, not strength - which doesn't mean it won't work, of course.
I wouldn't disagree that the Empire is in a bad position, and things are looking up for the Dominion at the time of Skyrim, but that's 30 years after the Great War. That's more time than passed between WWI and WWII in our world. The game and even the lore doesn't emphasis that very much, but the Great War was kind of a long time ago. It's in living memory, but pretty much everyone who fought in it is in or very near to old age (on the human side).
Elves want to create a sort of cosmopolitan cultural denominator for all of Tamriel. It isn't about domination but peaceful coexistence.
The Thalmor look back and see constant and unending agression against the elves. For example, after the Alessian rebellion and taking down slavery the Ayleids that remained, many having supported Alessia, where cleansed as a people and culture from Cyrodil. Is the initial conflict legitimate? yes, i would say so. The prosecution that followed? not so much.
That is the underlying problem they see with Talos and other cultural aspects, a menace to the existence of the elves themselves. These traits advocate genocide against the elves.
Talos had a walking black hole. He could have erased the elves completely, but he just took their capitals in military conquest. He brought peaceful coexistance and cosmopolitan life to a blood soked contitent. If Talos was genocidal against the elves, he sure didnt do a good job.