My goal is to have the audience ROOT for the SITH, support Palpatine in doing what is necessary, AND THEN feel guilty when they realize what is happening. Ep3 SHOULD almost feel like a good ending (to the clone wars) until you realize that the Might Makes Right mentality brings an end to peace and justice AND the republic.

I can't agree more. The audience must feel "betrayed" by Palpatine.

But maybe this shoud happen at the end of EP2. I really would like to have a full episode left to actualy see the Empire at its top, hunting the Jedi to the last. And bring our good characters to the point where they loose all hopes.