Watching Star Wars again, seeing Episodes I and II back-to-back for the first time, II was no longer a confusing mess. It all fits together.
I feel a case can be made that technological progress destroyed the Republic and things were already past the point-of-no-return even before the start of Episode I.
The major battle at the end of Episode II is droids vs. clones. Nobody is willing to fight this war. The only forces we see made of ordinary volunteers are national self-defense forces, lacking any ability to fight "overseas", or rather, across space - the volunteers of Naboo, the Gungan Army, and in Episode III, the Wookee Army. It's possible the political inaction we see in the Galactic Senate has "trickled down" into the governments of the member states, so that none of them are willing to risk "body bags coming home."
Advances in droid technology, however, circumvent this problem. After 1000 years of progress, now, anyone with deep enough pockets can just buy an army... someone like the Trade Federation.
The only risk left is committing political suicide in the Senate by invading one's neighbors, but as events in Episode I pan out, the Galactic Senate is shown to be too large to function.This is progress of a different kind - population growth, expansion of the Republic as more planets joined it, and the accompanying growth in the beauracracy to support all that.
The end result is, none of the Republic's institutions - the Senate, the Courts, the Jedi Order - can protect its members anymore.
The Invasion of Naboo is "The Emperor Has No Clothes" moment. Behind closed doors, political leaders reason "If this could happen to Naboo, it could happen to anyone, even us!"
Like thin ice that had been stepped on, cracks began to appear in the Republic... and the Separtist Movement was born. A new Age of Droid Warfare had dawned, and there was no going back.