Just cos we're spitballing here, how about the idea of doing away with K-sector Terrans altogether - just have the UED and the K-sector Terran factions just be a part/faction of the UED? Or, if you must have that element of "lone weak humans amidst two powerful alien races" thing, maybe have the K-sector Terrans be eventually and completely obliterated and the UED just replace/sub-in for the Terran presence? It would do away with the issue of Terrans being traditionally seen as weak/incapable of going toe-to-toe with the other two without too much artifice. Even if the UED do come later in the picture, we could explain their more highly advanced/powerful presence due to time dilation effects of the K-sector Terrans maybe?
The UED are depicted as fascistic largely due to their origins. The UPL were successful fascists in that time and so it's a logical extension from that I suppose. Besides, not all fascistic societies have to depicted as the "evil Nazi" stereotype where they do out-and-out "evil things". Just look at the Starship Troopers film, it's a satire of fascism (often mistaken as a celebration) and how "attractive" it can be.