It's bad writing because the emperor was made out to be smart. If he was an idiotic ruler, like a lot of rulers in history, it would be totally believable. However, he felt the power difference personally, and he's supposed to be this amazing revolutionary king who changed his empire in one generation to become more prosperous.

Everyone kept saying defeating Ainz is beyond human hands, and his conclusion is to band together with more humans, ffs. That's an idiot's decision, and he isn't supposed to be one. Bad writing.

And about him not witnessing Nazarick's true might? Remember his 4 best warriors only barely able to hold back 1 death knight? And Ainz produced one on a whim? And they are treated like maids? And the dragon? And that random kid that sank an entire platoon of soldiers into the ground? I'd think that's more than enough to realize humanity is doomed if they go against Nazarick. Quality vs. Quantity.

About him expecting a betrayal, he recognized that Ainz is very intelligent, with each move having meaning. Yet he expects such a leader to be betrayed by his minions? Like, how will he even incite them to rebel..? What will he use as incentive when Ainz has everything he has to offer and more, something he admitted himself early in the episode? It's a preposterous idea.

All that badly written asshat knows is that Nazarick offered them an alliance, and now he wants to use that alliance to somehow defeat Nazarick. That makes no sense because that plan assumes Nazarick will actually treat them like allies and they will be in a position to benefit from that in order to help the other humans. In that case, why not just become true allies? Instead of trying to rebel with limited info, a true wise king would try to understand WHY Ainz offered an alliance, instead of trying to use it against him.