There's a big difference between the Roman Senate in the Roman Empire and the Roman Senate in the Roman Republic. There were decades of bloody civil warfare during the transition between the two entities, and the Senate was completely reformed into a new body kept around by Augustus only to appease the masses and the retain the 'idea' of a republic. What you're suggesting is that an Elder Council who enjoyed many privileges under the Septims and were appointed for life effectively put their fate in the hands of a people who really didn't do much during the Oblivion crisis and turn the Cyrodiilic Empire into a representative democracy. I'm sorry, empires just don't turn into republics. More likely the Elder Council will appoint someone who they think they can control and keep up the facade of Empire, and they will do so until they mess up and appoint someone they can't control and Cyrodiil has a single powerful ruler once again.