In this episode, Chin the Great (Chin the Conqueror) was the founder of the city of Chin. This character is an allusion to the First Emperor of China, Qin (pronounced Chin) Shi Huang Di, the emperor was powerful and indeed a tyrant. A lot like Avatar's Chin, he wanted to expand his empire to the ends of the civilized territory, which is modern day China.
The seperation of Kyoshi from the mainland is an allusion to the seperation of Taiwan during the Chinese Communist revolution. They did not want to be ruled under a tyrant, so they broke off and made their own society.