Basically, there's an armistice between the Empire and the 2nd Aldmeri Dominion, who had ended the war conditionally after crippling loses on both sides, although the Empire fared worse than the Dominion since the terms they agreed to were almost identical to the ones that they had went to war over in the first place, including disavowing Talos worship and allowing Thalmor Justicars to basically do an inquisition in search of Talos worshipers, as well as having observers in place to make sure the Empire followed the terms. This was called the White-Gold Concordat, which is also a reason Hammerfell broke off in independence from the Empire, and they were at war with the Dominion for quite some time after that, although they managed to repel the Thalmor from Hammerfell. Talos is kind of the patron diety to the Nords, so being told they can't worship him is kind of like someone occupying Israel and telling them they can't worship Moses any longer. It's part of the reason the Civil War broke out, since the Stormcloaks largely view the Empire as elf stooges without a spine to stick up for what's right and that to preserve their way of life and not find themselves under the Thalmor's heel, they need to take their home from the Empire that is a shadow of its former self that clearly no longer has Nord interests at heart. 

Another thing to keep in mind about the racism demonstrated against the Dark Elves is that it's largely due to the massive influx of refugees after the Red Mountain erupted and the invasion from the argonians forced them to flee their homes, and if you look at real-life examples of how hard it is for a country to take on several thousand to hundreds of thousands of refugees, you can see how the local population could grow to start resenting them, especially if they have a history of warfare and mutual hatred between them. The Nords, dark elves, dwemer, and snow elves had all had it out for one another for quite some time for hundreds of years. It doesn't make the racism and shitty treatment of the dunmer that you see in Skyrim any more justified, but if you take a look at the history and consider how hard it is to take in a huge amount of refugees, you can kind of understand where they're coming from. Before you say, "But Dervs! There's only like a dozen dunmer in Windhelm!", keep in mind the entire game is SEVERELY underpopulated on all accounts. 

Also, keep in mind that the dunmer (dark elves) are hardly saints themselves. It wasn't long before the beginning of Oblivion there that Morrowind still practiced slavery, especially against the argonians and khajiit. It doesn't surprise me, at all, that the argonians would take advantage of political turmoil to get back at countless generations of oppression.

Also, the Nords were the first men to settle in Tamriel, which was ruled by the elves at the time, from a Northern continent called Atmora. The other men came sometime later, the last being the Redguard. There was actually quite a bit of peace between the Nords and the neighbouring snow elves for quite some time before tensions boiled over. It was hardly a war party that started conquering all the land.