If you want to draw on even other instances, the Jewish populations of ghetto's and camps in WW2 were even organized into controllable societies by the Nazi's.
the jewish administration has always been a tricky subject, but it was easier for the german war machine to have jews watch over other jews (the same kapos did in camps)
The concept of a xenophobic EMpire is a really EU based idea though with little rooting in anything but that one Officer's line which was pretty "broad". Originally it was written in that Luke was sort of "awed" by the sight of Chewbacca actually, and acted alittle less than politically correct.
don't forget that luke is supposed to be everyone who is watching the movie, like in fairy tales it's the character you can identify to. he was "awed" as any of us would be if he met such a wonderful creature
However, the point stands I think that the German Army in WW2 utilized people from nations it considered hostile... France, Holland, Balkan Nations, etc., etc...
the divisions made of soldiers from conquished countries are an interesting feature of the WW2 history, obviously the german needed them badly since the beginning of operation Barbarossa against USSR (as well as the involvement of the US in the War). You'll notice these troops were only used in eastern Europe and Russia not in Africa. However they came from countries with deep antisemite or fascists beliefs (Croatia, France, Holland...). Most of the time the troops were considered aryans but some other time the german would use salvic soldiers (rather unusual when you consider them inferior) like croats or ukrainian.
I don't think the Empirasuffered the same difficulties as the 3rd reich, it didn't have to fight a foreign coalition, just a rebellion.
local militias and fear (remember the EU rule of fear developped by tarkin in WEG RPG books ?) would keep the systems in line, if not they could still send a stormtrooper garrisson or a couple starships