Thanks to Shihali for the inspiration!
FF2’s thin dialogue leaves so much unsaid that I think most fans have little theories to flesh out the bones. My favorites are that the Palamecian army could have conquered the rest of the Altair coast but the Emperor would rather keep those potential subjects alive (as opposed to being overstretched), the Emperor threw the battle in the Cyclone so he could gather reinforcements in Hell while everyone else thought he was gone for good, and that the Dark Knight wasn’t mind-controlled at all. Pibugo on GameFAQs has an even more entertaining theory, namely that the Emperor was leveling up during the course of the game like your party and put his nose to the grindstone while the heroes were attending victory celebrations.
I’m not sure what quote Shihali is referencing, but I found this:
Technically, if we were to talk about actual, literal more or less brute power, the Emperor from FFII would take the cake. Pretty much every other villains took advantage of some source of power, however Emperor Mateus was just pure strength and pretty good one at that too, I mean he did let himself die, so he could fist fight Satan and it worked
Besides Kefka and Sephiroth, most other Final Fantasy villains contain an abundance of power from the beginning of the game. Emperor Mateus, like Kefka and Sephiroth, actually gain more power throughout the course of the game. And with a calculated villain like the Emperor, it makes sense that he would actually look at the big picture. While his plan is world domination, he reasoned he could control it all by taking over both Heaven and Hell. And this was the Emperor’s true plan.