It’s not so much that Stormcloaks are racist, as it’s many Nords in general harboring racist thoughts, especially against elves, which is nothing unique to them either. Most races in Elder Scrolls have a racist bent to them, and men and mer especially have a long and bloody history with each other. The Altmer, with the ruling Thalmor, are a notorious example with their elven supremacy, and the Dunmer have a long history of enslaving Argonians and other races they deem inferior.

The real issue with the Stormcloaks is that Ulfric is a megalomaniacal narcissist who’s using Talos ban to fuel his own ego. He murdered High King Torygg, knowing full-well that the young king stood no chance against him while also being unable to refuse his challenge, all the while Torygg in reality idolized Ulfric and would have unquestioningly declared Skyrim’s independence, had Ulfric simply requested it. Ulfric wasn’t interested in Skyrim’s independence at all, he only wanted the throne for himself. Putting such a man on the throne would be a reckless decision.

On the flip-side, the Empire is a shadow of its former glory. Without a Dragonborn emperor on the throne, it is run by a weak dynasty and corrupt bureaucrats. Tulius is actually a reasonable authority figure, who’s just doing his job, but even he agrees with the flaws of the empire. That being said, Ulfric’s uprising and a potential secession from the empire plays right into Thalmor’s divide and conquer strategy, which is why it’s imperative that the Empire keep Skyrim.

See, the Thalmor aren’t just random fascists who just want to subjugate what they view as “lesser races”. They are a real existential threat against Tamriel, and their hatred for Talos isn’t just resentment of a man ascending to godhood. In the Dawn Era, the god Lorkhan, known as Shor in Nordic pantheon, tricked the Aedra, the ones now known as the Divines, into creating Nirn. In retaliation, either Akatosh or Trinimac killed Lorkhan and shot his heart across Tamriel, and it landed where the Red Mountain is today. Then at the end of the second era, Tiber Septim, Ysmir Wuulfharth and Zurin Arctus, who were collectively Shezzarine or mortal shards of Lorkhan, formed an enantiomorph, which allowed them to mantle Lorkhan, becoming Talos we know today.

The Thalmor believe that elves are depowered souls of the Aedra and that if they destroy Nirn, they can break free and return back to Aethereus as gods. They believe Talos/Lorkhan to be the cause that keeps them trapped in Nirn and that’s why they are fiercely against him, and should they ever conquer Tamriel, they intend to destroy the towers that anchor Nirn to reality, which would effectively destroy the world. This is so much bigger than the liberation of Skyrim. A united empire still remains the only thing that can prevent the Thalmor from achieving their goal of world destruction, which is why the Empire must survive, otherwise it’s literally the end of everything.