Alot of people dont follow the lore, either cause its too complicated, theyre too lazy to read it, or they just want to play as their characters. And instead of rejecting this I feel it would be smart to embrace it.
No large scale faction wars, no complicated species lore. Keep it simple and mostly up to interpretation. The TSF would likely become some form of security for the sector giving them an actual reason to collect contraband. And the ASR could go back to being just what they were, rogues. Those who rejected the laws.
I feel letting people create their own lore would allow for much more fun within the game rather then getting critised if they don't follow it.