It's the Empire, builder of 14km long warships, super laser toting battlestations and world eating factories. They can certainly build a fighter better then the rebels, they just choose not to. I think the balancing for the Avenger and Defender centers on the fact that they are extremely rare. A rebel pilot's got about as much a chance at getting struck by lighting as finding himself in a dogfight with one of them. Even the 181st, the Empire's elite fighter wing almost never deploys with them. A simple solution would only have them appear once or twice in the campaign, and available in only a few multi missions and/or have a host option to exclude them. Besides the Ewing needs something to play with.
I think you hit it dead on there. The Empire relied on crushing military superiority, but that wasn't enough; they needed psychological superiority too. 14km warships that you didn't have a prayer to sink, battlestations that could vaporize you as soon as scan you, factories that could suck up the ground you stood on and build a ship to shoot you with, hordes of fighters that would make you shake in your flight suit.
Why weren't TIEs frightening in the games? Because you only faced 2-20 at a time. If you came up against a full Star Destroyer's worth (
72 fighters and bombers), you'd know fear, and probably get wiped out in the deal.
And that's why the Empire works that way, instead of producing and fielding a single squadron of TIE/Ds for the same price: Defenders would have the combat superiority, but not the psychological aspect. Gunships, Defenders, and Avengers were probably rare and only for the "special" missions that you couldn't send a Star Destroyer on, and that you didn't need to intimidate everyone.
Edit: It occurred to me that we've been saying this several times already in various places in this forum, but here it is again, hopefully a little more concise.