I only partially agree with you. Of course Ottoman society was lively and culturally rich. Nobody says anything about static. But the Ottoman Empire had a series of structural problems that were irresoluble unless the whole country was turned upside down:
- It was autocratic and teocratic. Not only all the power was in the sultan's hand, but he was required to exert it for things to run smothly. And the sultans stopped being even reasonably good.
- It was based in agriculture and in the XVI century the economy shifted to be controlled by commerce and manufactory. It was hugely hit by the economical crisis that turned it from a very rich country into a quite poor one.
- From a technological point of view it stopped innovating. For a time it continued buying foreign technology, but even that didn't suffice and it really fell behind.
This reasons are the basis for all the rest: Corruption, transformation of the army into a self-serving guild, economical crisis, rebellions, etc...
Your point that it continued expanding is accurate, but that can be explained by sheer size, as is the case for Russia in many cases. The Ottomans had basically run out of enemies in 1550 by killing all their former neighbours. The new neighbors were on the defensive and did not have territorial aspirations in Ottoman lands, or at least they were not pushing them. What was left was basically frontier wars. In EU2 you see the same thing. Big size carries the AI quite far, as it can field huge armies, and take wars to a draw even if technologically behind.
For the Ottoman empire, after 1550, the events started to be really bad. They are probably too good before 1520, but that is because people were treating to get them to expand correctly. If you take a game were the Ottomans have expanded correctly, you will see that their military technology is way better than European military technology. This is clearly incorrect, and sometimes leads to problems, as they continue leading the tech race well into 1750.
The events that I have placed are of two types. One type applies the brake to correct their military technology impulse by reducing innovativeness, offensiveness and quality, and at the same time takes out military investment. This last thing works worse than expected as the 1550-1650 technology levels are not very expensive, so often the reduction is negligible if they recently changed level. But in my tests, the whole series seems to have the correct effect of reducing Land military technology below the best European technologies by around 1675, as it should be. I have not seen that they automatically start losing land, often they continue expanding if they pick the right enemy. These events can be easily counteracted by the human player by clicking the DPs every 10 years (they are unlikely to be innovative anyway), and by investing more money in technology, as the human player is filthy rich.
The other type of events are the economical crisis. There were two very hard ones, and their causes were the same as the Spanish economical crisis. It is called the price-revolution crisis, it hit all of Europe and it was based on the overabundance of precious metals. But it hit two countries specially hard. Spain and the Ottoman Empire. Both had huge military expenses, were based in the agriculture and responded badly to the crisis, debasing their currency to keep Government income. The Spanish crisis is better studied, but it now appears that the Ottoman crisis was worse.
Of course we can discuss how to best represent the decline, but I think that a correction of military technology is required, and that the economical crisis should be also represented. That we make the whole thing optional, in other words AI only, does not seem fair to me. Other countries have bad periods that are well represented, but the Ottomans did not recover in EU2 time.