Cheers for the article, it's similar to what I was able to piece together by the end of the movie.
This is such typical J.J.Abrams lazy writing - introduce some major plot element for the 'cool' factor, fail to provide any in-movie explanation for it, and rely on other writers in tie-in media to plug his plot holes for him.
As soon as I started wondering about the FO and the Republic, I knew that the answer would be something like: "Well, to understand it you need to read the fifteen different tie-in novels, comic-books, games, and prog-rock albums." which doesn't excuse crappy writing.