I'm shocked. I thought I was the only person in the universe who thought this. As far as I knew, the Starcraft universe revolved around Raynor, Kerry, and Mengsk, with everyone else being their sycophants and zombie slaves.
I mean, the Starcraft website circa 1998 suggested that the Confederacy was the big human government and the manual only cemented this, but in the actual game they're barely involved and get killed off at the end of the first episode. You wouldn't know anything about the KMC or UP from the games alone.
You could also bring in the UED, I suppose. Maybe they think the Confederacy is too powerful and dispatched a fleet to interrupt the Confederacy's imperialist wars, only for the aliens to show up and mess everything up. I started writing a fanfic where that does happen: Alexei Stukov leads his fleet into the Sara system to liberate it from Confederate control and repel the alien invaders, while the loyalist Magistrate on Mar Sara is hailed by Tassadar who offers an alliance.
Technically, most of the lore about the Confederacy was introduced in the licensed fiction and comics. (I have no idea why, considering that the Confederacy was otherwise an afterthought in the games. Seems like a huge waste to dedicate any text to the Confederacy lore when they drop like flies in the first episode and never get referenced again.)
The families aren't mentioned in the manual, which doesn't explain the Confederacy's government at all other than to imply that they have a senate and that they're authoritarian imperialists. There's zero indication that the Confederacy is a corporate state like the KMC was supposed to be. The confederate form of government, by definition, is an alliance of multiple member states. We saw that in the game and manual: each of the colonies has their own colonial governments and militias, with the federal government having squadrons.
If we take into account (or not) that the Dominion apparently encompassing dozens or even hundreds of worlds as the plot requires, then there's no possible way that the Confederacy would ever have been centralized in one place or that Mengsk could ever have taken over. As I said above, the Confederacy is a confederation of many colonies with their own governments and killing the senate would not magically convince them to crown an infamous terrorist their emperor.
Think about it using real world analogues. If ISIS blew up Washington D.C., then the USA would not suddenly hand over power to the caliphate.
If we ignore Starcraft's fixation on Kerry for a moment and pretend Starcraft was written as straight military scifi rather than whatever it is supposed to be, then Mengsk's use of zerg terrorism on Tarsonis would not allow him to seize power. The Confederacy is not a sparsely populated third world country that is easily conquered, but a sprawling interstellar empire. Mengsk's coup would throw the Confederacy into chaos as the colonies and armed forces scramble for power.
In any case, the political and plot divergences I suggested in my fanfic ideas (UED vs Confederacy, Mengsk failing to take over, Magistrate teaming up with Tassadar to defend Mar Sara, Kerry not being zerg jesus, etc) are far too extreme for Starcraft and I'm probably better off filing off the serial numbers and writing an original setting. What do you think?