The main problem is that people have (nearly) achieved conquest or domination victory in earlier versions. Just read the Imperial Japan Challenge thread a few pages back. Once you have captured Europe or the Chinese/Japanese/Mongolian core, you become insanely powerful in all respects: GNP, production, population, technology. You are so powerful that the game is just no fun anymore. Therefore Rhye tweaked the tech modifiers, so that many cities slow down your research rate instead of indefinitely speeding it up. Yet experienced players like Whitefire could still conquer the world, by razing useless cities, etc, etc. When stability was introduced, it was a real killer, at the time of the Imperial Japan Challenge it was nothing to worry about anymore for the experienced player.
This means a few versions back almost nothing could stop the experienced player from conquering one the two mega-cores (European or Sino-Japanese), and once (s)he had one, difficulty went increasingly downhill.
However no civ ever succeded in capturing all of the world (or dominating HUGE parts of it) without stability problems or other real-life problems that are much harder to represent in Civ4, that would eventually put the expansion to an end and allow the other civs to keep up. There is nothing in standard Civ4 to reflect this, so Rhye introduced the tech modifier, the plague (although the main reason for introducing the plague was to get rid of fun-killing massive stacks of OLD units and - of course - to reflect this important aspect of history) and stability. Since this was obviously not preventing the player from overexpanding dramatically, Rhye re-tweaked the stability system in a way that makes stability a real challenge for expansive civs again rendering domination and conquest (almost) impossible as it proved to be in real life.
Don't forget that real life politicians/rulers mostly react, whereas you as the palyer can control almost all of your internal affairs, know and control technological progress in advance ("let's get guilds to build knights before the other civs research engineering"), etc.
To cut a long story short: in real life your "fiercest foe" may be your own people and human inabilaties not necessarily your neighbours. To reflect this stability was introduced amongst other things. You can still build respectable empires with many civs (Russia, America, Germany, France, Spain, England, China,...) and if you really want to go for domination/conquest victory just try to get one of the older (pre stability re-tweaking) versions and have fun.
