Mmm. Perhaps "Empire" and "Rebellion" would not be the right terms to go for in this case. I can see what you mean though and I understand the misgivings.
You see in actuality I think in this timeline an alternate Star Wars that resembles more like the Clone Wars may be more appropriate. The whole conflict between the Galactic Republic and the Confederacy of Interplanetary Systems may be a better analogue as a first set of star wars films in terms of the factions fighting.
Of course there would have to be some radically different stories and circumstances here. For example the "Republic" may not use clones, but relies on a massive yet diverse army - similar to the Rebellion in OTL, but on a larger and more conventional scale. Basically, if the Rebellion had the manpower and funds the same as the Galactic Republic. The "CIS" would perhaps not use droids, but chooses to rely solely on "stormtrooper" like soldiers - possibly clones, possibly just humans.
For me, I'm just imagining if George Lucas made a radically different "Clone Wars" type movie in 1977, that combines elements of "A New Hope", "The Empire Strikes Back", "Revenge of the Sith", the "Clone Wars" animated show and just kind mashed it together. Perhaps the "Empire" wouldn't even be called the Empire or perhaps the "Republic" wouldn't even be called the Republic, same goes for the CIS and Rebellion. Heck, filming locations, settings, and other things maybe different as well.
If you have your own thoughts on this please share of course! After all this is basically transforming Star Wars, one of the biggest and most successful franchises out there, so it won't be easy to do
I just like the idea of a "Space Pittsburgh" with Admiral Ackbar yelling "SPRING THE TRAP".
I think the thing to remember the Union was the underdog for an good while. It lost the War of Secession, it had that screw up that was the Second Mexican-American War, it spent years getting ready to take bloody vengeance on the Southland and the British and Freach. And I honesty think it be an fear of the South trying to take over and dominate the North along with the Redcoats. (And then Jake Featherston and the Freedom Party...)
So I do see and agree with @Joshua Ben Ari ideas, and my own being the Rebels being German and Northerners fighting the 'Redcoat' Empire and the Stone Feather Confederation.