The dominion didn't win. The Empire managed to push em back and take back White-Gold. By that time the font of Aldmeri strength in Cyrodiil was effectively wiped out, and the legions were battered to hell. I also think due to that colossal embrassment, the Dominion lost a fair chunk of its warrior caste...still would be nice to know what their forces comprised of though.
The two sides had to sue for peace, and while the Concordant seems to be heavily in favor of the Dominion (Which it probably was, considering how it was practically the same as the first list of demands), we don't know what the Dominion had to give up in exchange.
Why didn't the Dominion simply defeat the Empire, when it knew it could? Instead of forcing the White Gold Concordat on the Emperor?
They didn't. They were rather careful during the initial attacks, but when they found that they were meeting with less resistance than they had imagined, they decided to go straight for the throat. Didn't exactly end well for them. That, and wars are kinda costly. They probably knew thats where things were heading, but may as well try for something as cost effective as possible.
If it was to ban Talos worship, they could have done that by killing his worshipers...
I don't think the Dominion would have a good time doing that when they can now operate in the open in the empire.