The only problem I have with what you have said is when you say Blizzard need to sacrifice the N'elves for the purpose of a greater story. They don't have to keep doing it. They've done it many times, it's time to bring them some recovery.
They don't have to be a great empire again, I doubt anyone is expecting that, but you know what would be so cool and amazing to see, that they started doing great things again. Their 12-15k year old arcane mastery through the highborne/moonguard, their 10k year old nature mastery through the druids, their 15k year old priesthood mastery coming together for the first time since the start of the empire.. now that would be exciting.
Seeing night elves restore and rebuild amazing cities like Suramar and restore lush forests like Val'sharah or pre-destruction Ashenvale, and have a shining elegant priesthood with Temples like the Cathedral of Eternal night rebuilding a civilization. The last time all three of these forces were wielded and present in their society, they built an empire - therefore these coming together again for the first time since they really came out so so long again, should be vastly significant and exciting and a super super super welcome change from all the defeating, and more misery, more loss, more exciting things taken away. And a much wiser one too given all the experience they have and new purpose.
Building an empire takes 100s of years even for them when they were simply in another league to every other race, so even if that was their goal, it won't be realized in the current wow timeline, and no one particularly cares or wants night elves to be . Now, they aren't so much despite their arcane/nature/divine and fel mastery being unparalleled due to their knowledge and long ears, they are low in numbers and small on resources, and many other races aren't far behind too, wielding powers like the Light and void, the elements to an extent that was far beyond the comparative opposition they faced first time round.
Secondly they are not a conquest minded group either, they build and restore for beauty and health sake, not to rule and dominate.
WE don't expect an empire, what we expect is to see the night elves finally beginning to operate with the efficiency, strength and enhancements their knowledge and power give them, start seeing cities again, varied communities. I'd love to see them rebuild Azsuna where the highborne settle, cleanse the nightmare, build more cities like Suramar, Vashj'ir and Eldre'thalas - even if we only got one - that one was supposed to be Suramar, but it looks like it may not be playing part in the night elf recovery because now they've put the nightborne on the horde - which is why I have previously suggested they annex SUramar from the nightborne as its getting in the way of their recovery. Another solution could be Suramar becomes a shared city a symbol of the night elven groups, arcane, nature, coming together despite them being in separate factions. This underlies that faction loyalty on races that must appear like children to them is secondary to 10k year old beings like they, and they start forging a new purpose, with their roles in the horde and the alliance being not so confrontational against each other or other races, but more advisory, instead choosing to focus as collective group on world threats even if some of them are in the alliance and some are in the horde.
To this effect the centre of their activity should be their orders, the priesthood, the druids, the mage orders, the Wardens, the Illidari, rather than the collective night elves/nightborne etc being horde or alliance.
THis way having some of their people in both factions (night elves alliance, nightborne horde) will serve to at least give players of both factions an investment in the night elf story and it doesn't need to be one that is conflict based, it can be the exception and end up be the example setter for peace as the one area in the horde and alliance where the groups in opposite faction aren't actually fighting in their homeland but working together.
If that spread to Silvermoon too and the high/void/blood elves also ended up replicating the example set by the night/nightborne elves in Suramar, for the Thalassian group, mimicking the night group, then it would start really distinguishing elves as a different point of flavor for the horde/alliance.
And while blood elves would tolerate high elves and void elves in Silvermoon again in the future, notice how for this to happen they don't need to be friends with night elves. But the nightborne can be, even though they're also with the blood elves who don't like the night elves - and in time they can work on that relationship.
Sigh..if only huh. Why can't blizzard have the courage to re-write the role of these elves and do something different in the faction dynamic.. the races are complex enough to have these nuances not only exist, but easily understood and followed through. Players know with the night elves, they are doing their thing, they're much older, faction conflict is secondary, restoring the beauty and destruction now the legion is finally dead, and defending the world from future threats is there top priority. They remain in the factions because of their friendship to the humans (night elves ) and the blood elves (nightborne) but that's secondary to what their people are now seeking to do, as its much more important and significant to them.
They've been under the thrall and bane of the demons or what they did to them and finally that chapter is closed, they're not going to hold on to the petty 15 or 40 year struggle or hatred of the orcs and humans compared to this huge chip that's off their shoulder. And this is a commanility only the night elven peoples (i.e. night elf, highborne, nightborne) share - so they can develop their own thing. And put their role in the faction fighting in the back seat just as they put the Pandaren horde v Pandaren Alliance fighting in the back seat - sure they have friends in the alliance and horde, but they don't hate each other even though they'll help their friends fight sometimes.