Had the ottoman empire done that with wiping out completely the other nations(Greece, Armenia, other balkan states, etc) most of the state's revenue would be lost and would perish much sooner due to economic decline and revolts, you seem to forget that during the milliet system it was the non muslim populations that contributed to the empire's revenue the most, that was the case, if you want to keep your religion, you will be a second class citizen and pay most of the taxes to keep your head intact.
As far as the assimilation project is concerned, who says the ottomans didn't assimilate either by force or by other means many of the local people(greeks, armenians, capadocians, assyrians, etc), when they stepped into anatolia? Pure seljuks and later ottomans were few comparing to other people already living there, that's why modern turks have very few similarities in appearance with those old central asian nomadic turks from the Altay mountains and other places.
