I just sat through a very interesting, if sort of depressing, class on the history of the 1960s. Today our subject was McCarthyism.
All I could think about was applying this to our prequels.
Here's my thought process on this:
Palpatine is basically McCarthy. The difference is that people got wise to McCarthy's act before he could bid for the Presidential office.
This also expands on Blackhawk's ideas about Clone War II. Note that most of this is background stuff that wouldn't be more than hinted at in our Episode II/III, but we do need to have the whole story mapped out so we don't have accidental inconsistencies. Here we go:
Clone War I ends with the Mandalorians defeated, retreating to the far reaches of the Outer Rim. A young Senator, relatively unknown, but incredibly power-hungry and self-taught in the ways of the [Dark Side of the] Force, sees an opportunity. The Mandalorians use clones as slave labor. So he secretly meets with the Mandalorians with a proposition.
He tells them he can help them rise to power through his role in the Senate, if they will grant him a place of power in the new regime. At this point, they're not looking for inclusion, they're looking to control everything. He convinces them to create clone "sleeper agents" of people - it doesn't really matter who, just anybody they can get their hands on. They find out everything they can about them, kidnap them and replace them with clones. This occurs between Episodes I and II.
Palpatine announces to the Senate that he has become aware of a Mandalorian plot to overthrow the Republic using sleeper agents. He starts accusing people of being clones left and right. Jedi are brought in since, because of Anakin, they can sense the absence of the Force in clones, and can tell who really are and who aren't. Over time, with real clones outed and executed, Palpatine becomes a champion for the Republic against the Mandalorian menace.
Unfortunately, this creates the side effect of giving the Jedi more power. In order to combat this, Palpatine decides to start naming people who AREN'T clones. The Jedi give them a pass, saying they aren't. Palpatine now turns on the Jedi, saying that they are siding with the Mandalorians, or even that they have been replaced by clones themselves.
Throughout this, he slowly turns Anakin to his side, since he's really the only one who knows how to tell the difference between clones and "originals." By the time he starts accusing Jedi of treason, Anakin is on his side, believing that the Jedi are corrupt, and he leaves the Order. Obi-Wan does the same because Yoda, adhering to the basic Jedi principles of non-intervention, refuses to take action. He meets with Bail Organa and forms an alliance with him, fighting as his General.
Eventually the Jedi are forced into action, but it's far too late. Palpatine uses this to his advantage, painting the Jedi as a powerful ally for the Mandalorians, and that a Senate without a leader is too weak to fight the both of them. In a near-unanimous vote, he becomes the Emperor. He uses Anakin, now operating under the moniker of Darth Vader to conceal his identity, to exterminate the Jedi. Simultaneously, with the Mandalorians ready to sweep in, he double-crosses them, raising a massive army to fight them.
In the ensuing war, morale across the Republic is broken, and many, many lives are lost. The Republic eventually defeats the Mandalorians, wiping them out almost entirely. But there is rebuilding to be done. Under this guise, Palpatine does not give up his position as Emperor as was agreed to under the terms of his ascension to the position. Very few oppose him, and those that do quietly disappear. Thus, the Galactic Empire is born.
There are holes, yes - it's certainly not a complete outline. It's just my idea for how the Empire itself forms. This, however, can NOT become the primary focus of the films. The Galactic Civil War isn't the focus of the OT, the characters are. Here, the characters need to come first as well. That's going to be the trickiest part in getting this to work without getting bogged down explaining the politics.