Anywho, I think some people overestimate the abilities of the Altmer. I'm sure you average Dominion soldier know jack [censored] about the mythic, anymore than anyone else, really. They might have a vague understanding of what the Mer who do know stuff are talking about, but I doubt they know more than that. People forget that the Maormer and Sload ravaged them constantly, the former only being defeated "permanently" when the Psijics conjured up a storm (though this was mentioned earlier). In fact, they once had to call in aid from Cyrodiil since the Maormer were kicking their ass. One time they attempted a counter attack... so much for Old Mary's fleet.
Their desire to swallow their pride and pay off Reman also shows that they were worried he could get onto the Isles, at least. I doubt they thought he could win, though.
Also, the Psijics are not at the call of the Summerset Isle. They are not the Altmer's "better" version of the Mages' Guild. They aren't like the Nibeanean battlemages. If they piss the Psijics off, they aren't getting aid. The Psijics used to act as advisers for the Cyrodiilic Empires, which a "real" High Elf would never, ever do. Unless he was acting as a spy, or attemping to undermine the Empire.
(Though later Septims didn't trust them. So maybe they were lying.)
I'm not saying they're push overs, either. They are a dangerous nation, and they are the most advanced society on Tamriel for a reason. But they're not invincible.
(Sorry for editting this so much).