Learn English – What does “to come undone” actually mean

'Wherein' is generally only used in formal writing. The Oxford English Dictionary gives the following senses and quotes. I have given the most recent quote, from which you can tell that the word is no longer generally used.

1. In what (thing, matter, respect, etc.)?

   1891 - Oh, Britannicus! wherein have we offended?

2. In which (place, material thing, writing, etc.)?

   1888 - Peering keenly into the shadow wherein she stood

3. In, at, during, or in the course of which (time).

   1819 - Length of days Wherein to act the deeds which are the stewards Of their revenue.

4. In which (matter, fact, action, condition, etc.); in respect of which.

   1889 - There began a round of pleasure for Julia wherein she was the central figure.

5. Into which.

   1585 - We came to an anker very nigh the castle, wherin when our patrone would followe vs [etc.].

You are right that it would mean something like "in an empire into an empire", which is nonsense; fortunately, this phrase is wrong: the classic term is imperium in imperio, which is, as Alex explained, an "empire within an empire", a group or organisation that functions almost as its own state, even though it is officially not a state but merely an unofficial entity within a state. The use of the word "imperium" instead of a more neutral word meaning a commonwealth, like "res publica", implies that the leader(s) of this entity impose some rules on it that would normally be imposed by a formal government.