Imperials weren't in Arena, or Daggerfall. The arrival of orcs in Morrowind made sense because of the warp in the west, but I'm pretty sure the original "Imperials" (Tiber septim etc.) were bretons. so where do Imperials come from and why were they added?

The justification for Imperials existing was "Imperials being Nords is Septim propaganda to get the Nords to side with them." In reality, the Imperials descend from Nedes who stayed in Cyrodiil.