How would a world with heavy colonization work?

[Yanagi]

The idea was to create such interesting moral quandaries as this:
The party is helping a group of hadozee rebels, along the way hearing small clues hinting the nation was worse off before.

When they break into the throne room of the imperialist dictator, he explains to them that the hadozees are better off under his rule, because they were improvised savages before, and that he is trying to do the best for his “subjects”.

It sort of...doesn't work as a dilemma. Imperialists in real life use the "the primitives are better off now" argument and have for centuries, but it rarely bares up to scrutiny.

First, it presumes the imperialist knows what is "better" and that "better" is completely a function of objective measures. The nature of imperialism is to construct a cultural explanation for why gains for the imperialists is ultimately a Good for the world, even if specific aspects of imperialism are clearly immoral if not depraved, whether or not this claim that things are "better" outside. Historically, imperialists have fabricated societal ills that they then declared stamped out by their rule, so the existence of outright myths of "the bad time before" are a distinct possibility. Either way the speaker is embedded in a self-interested perspective that has to be doubted.

It also relies on the assumption that the colonized are not allowed to say "No" regardless of if its better or not.

Second, even if the observation is true, ultimately the imperialist mandate is not to make things "better" but to be profitable for the center, such that even objective improvements in quality of life are not a function of goodness or Goodness. An argument being made from the throne benefiting far more from the conditions set is highly dubious even if sincere. Hidden in the argument, "I made things better (for my own gain)" is the elaboration "if my profitability dictates, I can undo the good and even make things worse." That last bit is totally a thing dictators and imperialists do--claw back freedom and comforts if they affect the bottom line. If one wants to get technical, how much the imperialist dictator cares about "the Good" of the colonized would be visible in the accounting. If money's being spent to create infrastructure to make the Hadozee more effective labor units producing more value that's moved through the empire to enrich the cohorts of the imperialist dictator, then improved conditions are functional not moral.

See, the trick is that the standard is not "now" versus "before," but "now" versus "the potential now in which the colonizers were sharing goods things without extracting a bunch of wealth and labor." Even in the current day, right now, this kind of "we helped" hustle is still used; "we built a $200M bridge, and all we got was a $200B in mineral rights in exchange...you're welcome."

Third, while consent of the governed is always tricky to discuss in pre-democratic conditions because states are inherently coercive of individuals...it matters a great deal why the Hadozee view the current conditions as unacceptable and that's not present in the narrative. The "quandary" is only a quandary if the players are somehow kept in the dark about the entire ethos and rationale of the rebels, blindly supporting them and get no "hints" of why they're acting until the throneroom scene. The critical voice missing is...that of every other Hadozee living under these conditions, and how they view the relative worth of rebellion versus imperialism. It is super contrived that the dictator is arguing this moral case, period.

"The roads and hospitals are nice, but you are still a foreign oppressor and should not get to rule us by fiat" is a perfectly valid point.

Fourth, an instance of a dictator doing "good" things does not override the general problem of absolute power, and the specific case of an imperialist doing "good" things does not override the general problem of absolute power filtered through "us--smart and good; them--clearly need our help because primitive" distinction. Colonialism is built on controlling a subject population as economic means, and it has very little mystique beyond ethnocentrism. Colonizers are by nature a prerogative state existing separate from the normative power structure of the colonized, and that commanding role is imposed by literal use of force...first invasion, then a mix of stochastic and state terror...to achieve compliance. An endpoint with a "nice" dictator and good results has still required the tactics of imperialist dictatorship to reach.

Your scenario depends on a black box of setting history in which the exploitative behavior is simply omitted but the philanthropic behavior can be measured. Which is yet another thing actual colonial powers do...paint the colonized as ungrateful when they protest or rebel, omitting the endless grind of indignities and injustices that maintains colonial power.

Fifth, when colonizers do "improve" a colonized place, it's generally with enormous amounts of cheap or forced labor from the colonized themselves, with materials from the colony. So the credit taking that justifies...ya know, the imperialism and colonialism...is kind of ridiculous even when it is sincere. If I announce I'm going to cook dinner and make my dinner guests bring all the ingredients and do all the work, I can technically take credit for making sure they had a five-course meal. If I did all that and then stole a bunch of silverware from they're houses, I'd be pulling the same move as Mr. Imperialist Dictator.

A technologically superior nation that uses its power to uplift individuals while respecting their wishes is Wakanda at the end of Black Panther...and what T'Challa chooses to do is explicitly Not Do What Colonizers Do. The wheedling position of "but we did goods things, too, it's better" is what real life colonialism, with its suffering and massive body counts, has always sounded like.

Basically, the throneroom scenario can only be a "quandary" if the PCs and their players are kept at a very specific level of information about the setting, such that "we rule over these people without their consent, but it's okay because we give them prizes" seems like an unanswerable, "both sides have a point" dilemma, when the very nature of the scenario setting...a colonial holding...solves the quandary because the thing itself is defined by exploitation, and frequently clothed in condescending rhetorical exercises about the will to power of superior kinds of people.

If I adopt an orphan and provide them with love, food, clothing, and shelter, I am at first appearance a good person. But if that generosity is contextualized by me demanding reciprocity...hours of labor cleaning my house or working in my garden...that picture is muddier. And as I demand more of that orphan and provide less love/food/clothing/shelter relative to their effort, the less I'm being compassionate and the more I'm engaging in a transactional relationship. And if that orphan wishes to leave and I stop them...first with persuasion, then with threats, then with force...I am clearly acting in a kind of self-interest that disregards their autonomy and humanity and am no longer moral.

If I sit in my comfy chair when the cops arrive and reveal to them "...and I bought that kid a steak every year for his birthday...." do you think it would stop me from getting arrested?