Many can explain it better than I, but come visit over in /r/teslore!
It comes down to creation, and where the elder scrolls universe comes from. Lorkhan, a god, tricked several other gods into creating...well, creation. The gods who participated in this creation are known as the Aedra. Those who did not - the Daedra.
For his trickery, Lorkhan was punished. He was slain by Auriel's champion, Trinimac (who would later become Malacath, patron of the Orsimer), and his heart fired far away - this is a major plot point of Morrowind.
Now Men and Mer are from the same primordial stock, called the Elhnofey. At some point, this group split into two cultural groups, and over time, became Men and Mer - this is highly simplified, but essentially the upshot. The key point to realise is that the Thalmor know - and this is indisputable - that they are of divine stock. They recognise that it was Lorkhan's trickery that cemented creation, and forced them into this type of existence of mortal reality. Therefore, by undoing the works of Lorkhan, they seek to disrupt his influence from creation, and hence, essentially, unmake reality in order to return to an immortal existence. They must accomplish several things in order to bring this about:
They must stop worship of Talos, as he is a Shezzarine - an aspect of Lorkhan. As long as belief in a god exists, he is not dead.
They must destroy men, the chosen of Lorkhan, to undo his work.
Finally, they must unmake the world itself by destroying entities known as Towers. I'm still unclear on whether these are all physical structures or something more metaphysical, but tangible or not, essentially these are anchors for reality. As long as they exist, Creation will restart from the point at which Lorkhan tricked the gods into creating it. THAT point is static - it is ALWAYS there, and it is the start of linear time. The world will then progress normally, until it is time for Alduin, the world eater, to end it - that is his role in the universe. Should the towers all be destroyed, however, creation will NOT reoccur. The never-ending cycle of Kalpas - periods where the world exists - will cease. THIS is the endgame of the Thalmor.
You might want to read more about the towers here: http://www.uesp.net/wiki/Lore:The_Towers
So this unmaking of reality, is a fact. The Thalmor are, for all intents and purposes, justified in believing that this is a possibility.
Where the moral question comes in is whether you can justify the genocide of all men to guarantee a return to immortality and union with divinity for EVERYONE - all souls, living and dead.