Yeah, in some ways Lucas was taking a legit risk by putting all the money up front. Also, they started preproduction in 1995, at the time the Star Wars profit machine was just starting to get up to gear, so Lucas wasn't worth as much as he was by the time the film came out. And that was before the SE too--no one knew how huge the rennaissance would get. But at that time, Lucas was wanting to make the first film for $70 million. By the time they got to filming in 1997, they realized they were making a $115 million movie, but they let that happen because they saw that there was so much demand that it would recoup the cost easily regardless of the quality of the product, so they no longer had to worry too much about the budget as long as it didn't turn into ESB again, because then Lucas might not have actually had the money to pay for it (e.g., ESB went from something like $20 million to $32 million, sort of equivalent to if TPM started filming on a $115 million budget but came in at $200).

Once the dust settled from Episode I they were perfectly fine, they could have financed two films at once after that because they had all the tie-in deals and their share of the gross was ridiculous (I think Fox only got something like 20%? Maybe less?). It was pretty clear from 1997 onward that Lucasfilm wasn't going to have any financial problem for the rest of at least George Lucas' life, but I think those first few years must have looked a bit daunting. It's sort of like what happened with ESB, after it came out they were fine, but until that happened they had basically allocated every last penny to making it all work because he was building Skywalker Ranch at the same time.