While I think this would be a workable idea for one country or island in the new world, I think it's not a good idea for the entirety of the new world to be ruled by one faction, especially not a scary, non-human one.

We've already had at least three plots involving scary invaders from beyond Dagaria. Much more and we'll lose focus on the kind of cloak and dagger intrigue that makes this game unique. Also it would cast the PCs as (relatively) good, against an evil, mostly or all NPC faction. IS has always struck me as a relatively morally complex and grey game and that's one thing I like about it and want to keep.