1. They screwed up by deciding they could take on the Empire in the first place. A poor decision, given there's been no point at which the Free Realms have even vaguely looked like winning.
To be fair to them, at the time the war started, it was just Kindara and Cathay declaring war on Zonasa, newly independent once they broke the federation to attack us (at least in part because we wouldn't help them devour Greater Aenilia). Zonasa wasn't part of the Empire till later.
That said, from what I understand, a fight with the Empire was, if not the explicit intent, at least a strong desire of the Free Realms all along.