Wasn't the supposed mission to test the Federation's defenses? This mission shows the Romulans that the static Federation bases are easy targets for plasma torpedoes and can be gotten around with cloaking devices.
However it also shows them that Federation starships can track and destroy Romulan Birds of Prey. This would mean that while the Romulans can operate in Federation space, any starship can find and destroy their ships without too much effort. Also that the Federation starships would appear to be faster than the Romulan vessels, thus they would need to equalize the situation. Not only to be able to get past Federation starships, but also to be able to engage them in combat on a equal footing.
I don't stay with the idea of the Romulans being confined to a single star system. It doesn't track after this episode, plus it makes them seem far less of a threat for the entire era when they seem to be styled as a major threat to the Federation. Also their would be no point in having the three powers on the "Planet of Galactic Peace" in Star Trek V if Romulus wasn't a major power.
Also there is no logic in having the Federation not know who the Romulans are if they are right there surrounding their homeworld. Even less than the logic of not knowing who they are during a space war between Earth and Romulus when you should be able to find remains in the wrecked ships or planets if their was an exchange of territory or any attempts to claim colony worlds or the like. There can always be massive explosions that make identification of the bodies difficult, or the use of drone to make there be no bodies. But I find it difficult to believe that the humans and later Federation could effectively sit on the edge of the Romulus star system and not be able to identify them as Vulcanoids in 100 years. If they were light years away or even parsecs away it would be possible to keep that from the Federation....but over the distance of roughly 50 AUs?