The following from George explains everything:
"Everybody said, “Oh, well, there was a war between the Jedi and the Sith.” Well, that never happened. That’s just made up by fans or somebody. What really happened is, the Sith ruled the universe for a while, 2,000 years ago. Each Sith has an apprentice, but the problem was, each Sith Lord got to be powerful. And the Sith Lords would try to kill each other because they all wanted to be the most powerful. So in the end they killed each other off, and there wasn’t anything left. So the idea is that when you have a Sith Lord, and he has an apprentice, the apprentice is always trying to recruit somebody to join him — because he’s not strong enough, usually — so that he can kill his master.
That’s why I call it a Rule of Two — there’s only two Sith Lords. There can’t be any more because they kill each other. They’re not smart enough to realize that if they do that, they’re going to wipe themselves out. Which is exactly what they did."
The Phantom Menace novelisation includes the essential history of the Sith directly from George too. There was never a war between the Jedi or Sith but a skirmish of sorts. More so it was their own hubris that doomed them. There’s also no contradiction to the formation of the Republic which was 1,000 years ago. The Sith could’ve been involved in the full scale war that brought about the Republic but it doesn’t necessarily mean it was a full scale conflict between Jedi and Sith armies as per George.
Full Excerpt:
Night blanketed the vast cityscape of Coruscant, cloaking the endless horizon of gleaming spires in deep velvet layers. Lights blazed from windows, bright pinpricks against the black. As far as the eye could see, as far as a being could
travel, the city’s buildings jutted from the planet’s surface in needles of steel alloy and reflective glass. Long ago, the city had consumed the planet with its bulk, and now there was only the city, the center of the galaxy, the heartbeat of the Republic’s rule. A rule that some were intending to end once and for all. A rule that some despised. Darth Sidious stood high on a balcony overlooking Coruscant, his concealing black robes making him appear as if he were a creature produced by the night. He stood facing the city, his eyes directed at its lights, at the faint movement of its air traffic, disinterested in his apprentice, Darth Maul, who waited to one side.
His thoughts were of the Sith and of the history of their order. The Sith had come into being almost two thousand years ago. They were a
cult given over to the dark side of the Force, embracing fully the concept that power denied was power wasted. A rogue Jedi Knight had founded the Sith, a singular dissident in an order of harmonious followers, a rebel who understood
from the beginning that the real power of the Force lay not in the light, but in the dark. Failing to gain approval for his beliefs from the Council, he had broken with the order, departing with his knowledge and his skills, swearing in secret that he could bring down those who had dismissed him. He was alone at first, but others from the Jedi order who believed as he did and who had followed him in his study of the dark side soon came over. Others were recruited, and soon the ranks of the Sith swelled to more than fifty in number. Disdaining the concepts of cooperation and consensus, relying on the belief that acquisition of power in any form lends strength and yields control, the Sith began to build their cult in opposition to the Jedi. Theirs was not an order created to serve; theirs was an order created to dominate. Their war with the Jedi was vengeful and furious and ultimately doomed. The rogue Jedi who had founded the Sith order was its nominal leader, but his ambition excluded any sharing of power. His disciples began to conspire against him and each other almost from the beginning, so that the war they instigated was as much with each other as with the Jedi. In the end, the Sith destroyed themselves. They destroyed their leader first, then each other. What few survived the initial bloodbath were quickly dispatched by watchful Jedi. In a matter of only weeks, all of them died. All but one. Darth Maul shifted impatiently. The younger Sith had not yet learned his Master’s patience; that would come with time and training. It was patience that had saved the Sith order in the end. It was patience that would give them their victory now over the Jedi. The Sith who had survived when all of his fellows had died had understood that. He had adopted patience as a virtue when the others had forsaken it. He had adopted cunning, stealth, and subterfuge as the foundation of his way—old Jedi virtues the others had disdained. He stood aside while the Sith tore at each other like kriks and were destroyed. When the carnage was complete, he went into hiding, biding his time, waiting for his chance. When it was believed all of the Sith were destroyed, he emerged from his concealment. At first he worked alone, but he was growing old and he was the last of his kind. Eventually, he went out in search of an apprentice. Finding one, he trained him to be a Master in his turn, then to find his own apprentice, and so to carry on their work. But there would only be two at any one time. There would be no repetition of the mistakes of the old order, no struggle between Siths warring for power within the cult. Their common enemy was the Jedi, not each other. It was for their war with the Jedi they must save themselves. The Sith who reinvented the order called himself Darth Bane. A thousand years had passed since the Sith were believed destroyed, and the time they had waited for had come at last.
“Tatooine is sparsely populated.” His student’s rough voice broke into his thoughts, and Darth Sidious lifted his eyes to the hologram. “The Hutts rule. The Republic has no presence. If the trace was correct, Master, I will find them quickly and without hindrance.” The yellow eyes glimmered with excitement and anticipation in the strange mosaic of Darth Maul’s face as he waited impatiently for a response. Darth Sidious was pleased. “Move against the Jedi first,” he advised softly. “You will then have no difficulty taking the Queen back to Naboo, where she will sign the treaty.” Darth Maul exhaled sharply. Satisfaction permeated his voice. “At last we will reveal ourselves to the Jedi. At last we will have our revenge.” “You have been well trained, my young apprentice,” Darth Sidious soothed. “The Jedi will be no match for you. It is too late for them to stop us now. Everything is going as planned. The Republic will soon be in my control.”
In the silence that followed, the Sith Lord could feel a dark heat rise inside his chest and consume him with a furious pleasure.