I would say that the collapse of the ERE is quite recent. Maybe some 20-30 years before game start. It would've shattered into Epirus, Thracia, Nicaea, Trebizond and Ikonion with the loyalists holding onto Constantinople, parts of east Thrace and a few parts of the western Anatolian coast (like Skutarion (Tur: Üsküdar)). Now, Baghdad would've conquered Trebizond and Ikonion and set up a muslim state there (probably utilising a lull in the fighting with Egypt). This muslim state would have quickly collapsed as most Turks are Orthodox. However, there are muslim Turks as well, in all probability mainly in inland provinces such as Konya. The Caliphate would probably have needed to send troops to prop up Konya against Orthodox rebels and the Orthodox Turkish state breaking off from the Muslim Turkish state. Also probably attempt to crush the Orthodox Turks.
Egypt would have used this opportunity to launch a new war against Baghdad, forcing them to move troops away from Anatolia after securing some sort of cease fire with the Orthodox Turks. The Orthodox Turks would then have gone on to conquer Eastern Thrace and Western Anatolia from the infighting states. I would say that Thracia would've been in possession of all of Thrace at that time. This brings us to game-start.
Something like that. I haven't really come up with the reason for the shattering but it would probably've been the usual thing, i.e. succession and/or attempting to become Emperor. There probably would've been some sort of coalitions at the beginning. Maybe Thracia and Nicaea go together and crush the loyalists, then turn on each other (which with the Baghdad invasion wouldn't be too hard for Thracia), with Epirus a bit busy beating down a few dissidents in Hellas and getting beaten up by Thracia. My idea is that Thracia had the upper hand until the Orthodox Turks came along (something which was totally unexpected).
Though to be honest, the whole set-up with the shattered ERE only came about because a lot of people were for some reason in opposition to the idea of a surviving ERE...but this scenario is cool so I say we keep it anyways.