And yes, the Chinese Imperial Palace is displayed on an extravagantly grand scale just because it is possible to do it only in China! China has more people than any other country and can afford the larger than life scenes in opulent settings.
The Emperor is at first shown as a kind father who wants to maintain a harmonious balance of family and state. Ultimately, we find out that he is a hypocritical megalomaniac who obliterated his first wife's family in his bid to become Emperor and will not allow anyone to cross his will in his kingdom. Interestingly, even for a blood thirsty dictator, he has his soft spot, and that is his love for his first born son, who means well but appears rather weak of morals.
The acting is very powerful: the epitome of Chinese acting is in the facial expressions within a restrained and mechanical setting (see Chinese opera) and both Gong Li and Cho Yung Fat do a great job in their roles. Watch the eyes and the hands... The occasional outbursts of real emotion when the character is pushed beyond its limits: see the Empress when she occasionally cannot help herself and tries to seduce the Crown Prince as a woman; see the Emperor when he toys with the Empress and shows her his kindness in prescribing herbal potions and her defiant reply makes him toss his arm in frustration; the final eruption of the despot when the youngest prince dares to rear up with hate...
I wonder if any dysfunctional family that lives with a totally controlling father and experiences his insane fits of punishment can relate with the control and violence shown at the end. He tolerates the Empress because she is a princess and very decorative and the mother of his 2 younger sons, and he even tolerated silently her affair for a while, but he will not tolerate her efforts to usurp him publicly. I can predict that the Empress will die a slow and humiliating death unless she finds a way to kill herself first.
What I picked up very clearly is the subtle form of psychological cruelty that underlies the Chinese concept of revenge. Many long-standing cultures understand this form of torture very well which goes above and beyond killing a person. Think about the movie Jean De La Florette where the protagonist is slowly killed by the grinding labor of finding non-existing water. It is the slowly grinding down of a person's will through day-in and day-out abuse. See the daily poisoning of the Empress under the guise of caring for her health. See the impossible ending offer to the rebellious prince to choose between killing his own mother with regular offering of the herbal potion versus death under his father's hand - the prince decides to end his life to get out of this insane set of situation. He actually succeeds in comparison to the eldest prince who tries suicide the previous evening and fails to slice his own throat.
Yes, the Emperor is ultimately an evil man because he sacrifices all that he loves for his political ambition to be the boss, but he has his human dimensions: he is attracted as a man to the 2 women he loves most in his life, as seen in their rare intimate moments together and he loves the first son unconditionally... Personally, I think that the characters are very well developed because they are complex, obsessed and quite multi-dimensional in their basic human drives. They make sense within the constraints in which they are cast.