The Republic lucked out with having no main geopolitical enemies at the time, although that wasn't certain. God only knows what could have been lurking out in the Unknown Regions.
And convincing a professional military manned by volunteers to turn on the Republic and the Jedi (after a thousand years of peace and prosperity) is a tad harder than Clone soldiers either conditioned from birth to obey orders without question or having a full blown inhibitor chip in their brains.
The fact that the Sith desire a more militarised Republic, evil purposes aside, just strikes me as them being more aware of how power really works than the idealistic lunatics who founded that iteration of the Republic. Without a proper military (not even a behemoth army, but a strong Navy), the Republic had no real force to back up its laws, and thus slowly lost legitimacy. Anti-slavery laws were flagrantly disregarded in the Outer Rim as there was no fuckhuge battlegroup and its marine contingent to stomp order into that corner of the galaxy.
Look, I like George Lucas and the universe he created, but he is fanciful liberal at heart. Not nearly to the same extent as Roddenberry, but Ruusan would have given Heinlein a stroke. A demilitarised Republic was slowly picked apart over the centuries, by pirates, gangster, and eventually overmighty mega-corps, and if the Sith hadn't killed it off then someone else would have.
Counter-argument(s):
-- The Republic, post-Ruusan, was explicitly founded upon the (appararent) extermination of the one truly peer-level enemy in known existence. The previous period had seen centuries filled with the excesses of unrestrained military forces, so the reaction to this was ultimately quite natural. I actually agree that a good fleet would have been a vital addition (in the old EU, the New Republic did try for this, and for the better). But I can see why, at the time, overwhelming sentiment would be against that. I would not see this as "idealistic lunacy", but as a quite understandable (if ultimately imperfect) response to lived experience.
-- Even if the Republic had set up a professional, but not
too powerful, military (mainly a fleet)... I don't agree that this would be so very difficult to subvert by the Sith. Observe how when Revan turned against the Republic, most of the fleet went with him. That fleet wasn't crewed by clones. They went willingly, because under the 'right' circumstances, a military will almost always follow a leader who
appreciates the military... rather than a lily-livered civilian government. The Sith would no doubt be able to engineer those 'right' circumstances. This would take time and effort... but so did the creation of the clone army, when you factor the whole lead-up to its creation (and the 'growing time') as part of the investment.
-- What evidence we get ultimately indicates (both directly and indirectly) that for the longest time, the Republic's local forces (run by the member-polities) had a good grip on keeping order. The corruption and excesses are all tied to the machinations of the Sith. (E.g. the rise of slavery is strongly tied to the renewed ascendancy of the Hutts in the Galactic East, which was a result of concerted efforts by the Sith. I think the Zyggerrians becoming a major slaver-power again was also actually a recent development.) This demontrates that the most obvious faults of the Old Republic are not the result of its initial set-up, but must purely be attributed to the Sith influence.
-- Based on the above, my general assssment remains that without the Sith doing their thing, the Republic would have continued to function as it did in its first five-to-seven centuries or so, i.e.
splendidly, for a very long time. Considering also that the Jedi would be in a far better position, I think that the major "outside threat" (the Vong) could be effecively confronted. It could indeed be argued that the Vong invasion would prompt a re-evaluation, and the establishment of a permanent, well-armed fleet thereafter. Thus actually yielding the result we both think would be best. (Mainly a permanent fleet; the New Republic had
already banned slavery and adopted a charter of sapient rights to be universally enforced.)
I ultimately agree that ideally, the Republic should have been
slightly more centralised (e.g. explicitly banning slavery and certain other violations), and that it should have had a serious fleet & marine corps to enforce law and order. But I don't think that the Republic was a failure due to
not having these things. It performed remarkably well despite not being perfect. Indeed, it did better than any other attempt at galactic governance in the setting. (Although if we disregard the Denningverse and take
The Unifying Force as the 'final chapter' it was meant to be, then we're left with the suggestion that the galacy is thereafter left with a superior government, which will lead to an even longer and more sustainable era of peace. In my own head, I prefer that reading...)
Re: Lucas's political leanings -- the intended interpretation of the late-stage Old Republic seems to be 'gilded age in space', with Lucas implicitly taking the position that the weak government not controlling the megacorps is very much a bad thing. So if anything, "the Old Republic was poorly set up" is actually the intended reading, derived
from his lefty ideas. Whereas my own take ("the Old Republic was actually very well-designed") is an interpretation based on a more conservative world-view that inherently distrusts overly-large governments...
I think that matters would be better-clarified if Lucas had possessed a greater understanding of certain socio-economic realities, since the picture he paints simply doesn't make sense at times.
But in conclusion: I simply don't think that there was any version of the Old Republic that we might design that
wouldn't be vulnerable to Sith manipulation. They corrupt things, and turn them into tools of evil. Whatever tools you give the Republic... those would eventually be perverted to serve the Sith. The more powerful the tool, the easier it would be to corrupt. Note how the Jedi is at his best when he
rejects power, and falls when he
seeks power. This is tied into the metaphysics of the setting.
Hence my belief that the Old Republic's unassuming, powerless nature was actually the best possible guard against corruption. It didn't prevent the process, but it at least ensured that anyone corrupting the tools of power would still be denied access to
powerful tools.