Skyrim obviously is in turmoil and Imperial authority is weakened. In the place where it's still strong (Solitude) there is still equality.
And Human culture is obviously the best, for Humans AKA the majority of the people in the Empire.
The ONLY way I can see a better mix of Elven and Human cultures is if Akavir invaded and they had to ally up for survival. maybe then they will grow less resentful of eachother and work together which will over longer periods of time, effect both cultures.
Spectre, what the Dominion is doing by the forceful removal of Talos is the same as the forceful "oppression" of him. The Dominion are hypocrites.
What about them is mistreated? Ocato was the second highest dude in the Empire, and after Oblivion, he was the Emperor, the highest position available. Nothing about the elves is mistreated. They're the most skilled craftsmen, and artists. No one is disputing this, but Heaven forbid men try to compete!
The beast races aren't even a part of this discussion.
Coexisted fine? Barely, they were second Citizens no matter how you look at it. They have their own Empire now, you really think they want to go back to being lower class citizens just to have peace? Seems like a bad, and craven deal.
Skyrim always had a lot of freedom, so they might or might not have been allowed to make the decision about the beast races themselves.