Ok, my answers to these questions are: Yes. Definitely. And no.
And here's why: The Force isn't Dark or Light. It's just the Force. The Dark Side and the Light Side are just parts of the whole. Two sides of the same coin, so to speak.
Bastila could have indeed come up with this plan. After she had fallen, and after Revan left her, I imagine that she probably became even more obsessed with pursuing the Light. And you know what happens when people become obsessed with something. If left unchecked, the obsession consumes them, warps their reality. Bastila believes she is following the Light, but she is merely too blinded by it to see that she is not.
If the Sith knew what she was planning, they would indeed 'soil themselves'. They crave power and control. And what's there to control if everything is destroyed? I believe the knowledge of what Bastila is planning would motivate them into action. (And perhaps it already has.
Wiping out a Galaxy of all life and starting over doesn't cleanse anything. It's akin to the 'Great Flood' in Genesis. And all we have to do is look at the newspaper headlines to see how well that worked.