I get what you mean about “sides” in this context. My thinking was that each planet can only choose 1 side or the other, but I suppose the sentence leaves that detail up for interpretation.
True. The capitalization would almost imply that they are turning into a third major faction.
I like “independence” better than “peace.” I think it puts the focus more on their local interests and less on its larger implications for the war.
Maybe “and Anakin returns Ahsoka” instead of “while.” Then you can use “Meanwhile” in the next sentence, which really does need something at the beginning to transition into the current action.