If you're looking for a situation where absolute monarchy is (arguably) a better government than democracy, I can think of two possibilities:

• Everyone must agree: There is some immediate threat, (war, plague, supernova) which the citizens are willing to give up their liberty to stop. That is, like the dictators of Rome. Of course, Julius Caesar was the only one not to give up power afterwards (and he was assassinated in short order), so if you don't want your empire to go away in a few years, the threat has to be constant (or at least, everyone has to think it is).
• Benevolent dictator: The emperor knows what the people want and is willing to give it to them. Why would this happen? Maybe they're more compassionate than most emperors. Maybe they want to be remembered fondly by future generations. Maybe the reason why so many absolute monarchies crumble is because the rulers just have no idea what they're doing. Maybe they're an AI, robot, or cyborg who was specifically built to rule. Whatever the case, the ruler isn't simply a power-hungry tyrant, and isn't an incompetent, obsessed with having larger monuments than everyone else.

If you aren't looking for an empire that's better to live in than a democracy, but you still need it to be stable, you could simply make the emperor more powerful than their subjects. They could be a super-powerful alien or have an intensely loyal (or mind-controlled) army. Perhaps the emperor lives in another dimension where they can hurt you but you can't hurt them or they are a hive mind made up of all the ships of the starfleet. For example, cyberpunk fiction tends to depict a future where the powers that be have technology so much more advanced than the common person that there's no hope of overthrowing them. Cosmic horror, on the other hand, has aliens so old and powerful that human weapons are lucky if they even cause flesh wounds, and their followers see them more as gods than kings.

Of course, if your space empire isn't populated by humans, you could come up with all sorts of psychological reasons why they would choose to form an absolute monarchy.

I've been reading a book about this recently and I'm recommending it to everyone right now. It's called The War of the World, no not the H.G Wells one, but it does reference him a lot.

http://www.amazon.com/The-War-World-Twentieth-Century-Conflict/dp/0143112392

The book takes a detailed look at religion, race and economics and links them all together to describe how each one can be used to create conflict if they're manipulated correctly.

I would imagine that this is how an empire is established and how they stay on top. They own the economy and manipulate it so they are always the winner. They establish racial boundaries and force their views and religion onto everyone. If they resist then death is the ultimate penalty.

Who's to say the Emperor has to be the same person or even a single person? What if it was a group of people who ruled the empire and they spoke through the emperor who they control?

They own the economy and manipulate it so they are always the winner. They establish racial boundaries and force their views and religion onto everyone.

Depending on how you interpret the first sentence, isn't this the essence of fascism?

Through some variation of romantic nationalism, every race is declared entitled to their respective home-system. The remaining stars are dealt out "fairly" by the Human Master Race (or maybe they're space-elves or whatever).

In sci-fi that takes place on an interstellar scale, the concepts of a home-system and homeworld are near-universal, so there probably won't be any claims to territories that aren't in the immediate vicinity of a star. However, depending on how FTL works, space-lanes or stargates might be claimed by someone. Perhaps by the Human Master Race, in order to consolidate imperial infrastructure, or by the races that have traditionally used them. In the latter case, expect the ruling party to call eminent domain.

On the other hand, there are occasionally two races that claim the same system as their home. If humans are one of them, the other is often from Mars, and is usually the first alien species they contact. If not, the two races are likely from the same planet, and have a symbiotic relationship (keep in mind there are 3 forms of symbiosis). It is also common for there to be at least one artificial race, whether robot, clone, or uplifted animal. (Though this probably goes without saying, their creators almost always consider them as property.) Regardless, the two races either fiercely hate each other or rabidly protect each other. Both of these are easily manipulated.

Who's to say the Emperor has to be the same person or even a single person? What if it was a group of people who ruled the empire and they spoke through the emperor who they control?

Like how in Equilibrium, Father has been dead for years, but his successors pretend to be him (for reasons that aren't clear to me). Or 1984, where the Inner Party speaks through Big Brother, in order to seem like they have a more coherent voice than they really do. Or in That Hideous Strength where NICE pretends to be run by a disembodied head, because no one would be stupid enough to join them if they knew they were really a Satanic cult. Or The Wizard of Oz where Oz pretends to be a giant flaming head so people will take him seriously. I should stop here, or this list isn't going to end anytime soon.

Also, I believe this link is relevant (keep in mind, the comments tend to be the most important part of this blog): High Kings and Galactic Emperors.

In basicly all 4X games it's a single race

Though, the reason these games (I'm mostly thinking Master of Orion, here) equate race and empire is because there are other empires in the game, and race (i.e. appearance and abilities) is an easy way of distinguishing them.

I'll invoke the Rule of Personification Conservation to describe this. (That's a link to TV Tropes, by the way, so don't click on it if you're not free for the rest of the day.) The rule suggests that if a character isn't human, there should be a good reason for it. There are still a couple of non-reasons that work -- you could add in a few token aliens, just to make your galaxy seem bigger and less human-centric, or you could purposely reject this trope, and add alien races willy-nilly.

But supposing that you want to follow the rule, here are a few options that spring to mind:

• One species per empire - each faction of the game is composed of one race. Normally, each faction will gain certain perks based on their race's biology and culture. This also tends to make certain races natural allies, and others natural enemies. Personally, I despise this trope, but it is the most common way of doing things.
• Certain factions are multi-racial - Some factions are composed of multiple races, possibly to demonstrate their tolerance for other species and points of view. If not, it's probably because the faction works by one of the paradigms I list below.

I get the impression that the player of your game isn't supposed to be ruling one empire among several (a la Master of Orion, Civilization, Alpha Centauri, etc.), but is trying to manage a single, monolithic empire, whose only enemies lie within its borders. In that case, the rule applies a bit differently; here are some examples:

• Xenofiction - you remove humans from the game, wholesale, or just push them off to the side because you want to make a point of the fact that your characters don't act like humans. If you don't think that humans would form a galaxy-spanning absolute monarchy like you want, you could just make them aliens, and claim that that's the way their brains are wired up (as I said in my earlier post).
• One species per province - different regions of the galaxy are populated by different species. In this case, the player will associate each race with its particular needs. So for example, if the space-elves and space-dwarfs hate each other, the player will have to get them to cooperate, and make sure that neither one feels that the other is getting a better deal.
• One species per function - different species are traditionally given different types of work, based on what (popular belief thinks) they are best suited to. Parallels can be drawn to traditional gender roles or to a caste system. If you need to highlight a character's rebellious nature, you could show them doing a job that isn't traditional for their species.
• Master and slave races - certain species -- especially robots -- get the short end of the stick, and are (almost) always seen in servitude or doing menial labor. Naturally, the master race will believe that this arrangement is actually "one species per function", and that the slave race is more suited to slavery, while the master race is suited towards leadership. The key difference between this one and the last one is that the master race is clearly better off. If you have a race of priests, a race of politicians, a race of warriors, and a race of artists, which one has the higher status? But if you have one race that runs things and another that does them, it's a bit more obvious.