Wow there is a lot to unpack there, I'll try to answer you but if I'm off target clarify for me and I'll try to answer more fully.
"Why do you allow that?"
It is a combat game so player versus player fighting is an inherent part of the game. Additionally the game is set up to discourage any bullying but it is impossible to eliminate it without eliminating combat entirely. The reward for killing smaller players is insignificant. The movement times for larger players are much higher than for lesser advanced players.
Having said that you touch on one point that is a pet peeve of mine although I'm not sure I have much of an answer to it. The game has evolved to a point where once an alliance asserts any degree of control on a server more often than not other alliances focus on being wing alliances instead of taking the #1 alliance down. This is really boring.