What you describe is a [Mexican standoff](https://www.wikiwand.com/en/Mexican_standoff):

>A Mexican standoff is a confrontation amongst two or more parties in which no strategy exists that allows any party to achieve victory. As a result, all participants need to maintain the strategic tension, which remains unresolved until some outside event makes it possible to resolve it.[...]

> The key element that makes such situations *Mexican standoffs* is the equality of power exercised among the involved parties. The inability of any particular party to advance its position safely is a condition common among all standoffs; in a "Mexican standoff," however, there is an additional disadvantage: no party has a safe way to *withdraw* from its position, thus making the standoff effectively permanent.

Your Colonists and Outsiders already have achieved the level of MAD (mutually assured destruction) (based on this:'*the magnitude of weaponry at each side's disposal means that the first shot of a war could also be the last.*'). Neither can advance or safely withdraw. I would not expect further escalation, at least not until the Butchers gather more power. Then they will be able to serve as an external force capable of resolving the existing Mexican standoff.

Proxy wars will be fought. Espionage should flourish. But I seriously doubt that either the Colonists or the Outsiders will risk an open engagement of their troops. If it happens both sides will try to cover it up as fast as possible. The actual Cold War is a very good example of this. Soviet and American troops were frequently present (openly or secretly) in the same war areas but they never officially engaged (or at least there is nothing I know of).

If both the Colonists and the Outsiders can support the stalemate economically, it is quite stable and can last indefinitely. 

I would suggest keeping an eye on the Butchers, though. Both empires could and should saw disaccord and disagreement the pirates ranks. The Butchers territory can be used for proxy wars and as a general vent for hawks in both empires. It is also important to prevent the pirates from organising into the third power that can break the existing balance of powers.