The intent is not so much preparing for the war but rather for the after the war. It is supposed to re-distribute the costs for running and defending the Empire so that they no longer have to be burdened upon the British Economy in the Home Islands alone and to get the nationalist movements ( especially in India, but more on that in due time ) to work with the Imperial authorities instead of against them. Call it federalization of the Empire. Some colonies will be reworked into counties under the direct controll of Whitehall, some will be granted a semi-dominion status like described in the update. I have special plans for India.
Before anyone asks: The existing dominions, i.e. the ANZACs, Canada, South Africa and Rhodesia ( IIRC they had Dominion Status in RL, anyone who knows differnt is free to correct me )will retain their Dominion Status, but I fear that Canada for example will never introduce the Maple Leaf Flag and rather stay with the one they use now.
EDIT: I will whip up one... maybe you will like it anyway.