A few thoughts (feel free to correct me, any 16th century experts):
There _was_ a Medieval tradition of a Good Emperor, who together with the Good Pope, would unify Christian Europe as a sort of prelude to the Millenium, and a number of medieval monarchs had been hopefully proposed for the job by wishful thinkers. I'm not sure that this thread of thought was still taken very seriously by the 1500's (although the notion of the Christian Universal Empire and a sense of awe towards the old Roman empire were still pretty common), but in any case any notion of a unified Christian realm was killed stone cold dead, at least for a while, by the Reformation.
The important thing was that the _Habsburgs_ didn't think in terms of a universal empire. A universal _Church_, true, and they might have succeeded in militarily forcing back more of Europe into the Catholic fold, but they had no plan to actually make themselves rulers of Europe: it was against notions of propriety that they held in common with other rulers of the time. It normally wasn't kosher to just kick a legitimate king into the gutter and take over his country: there was such a thing as a dynastic principle, and you needed at least _some_ kind of hereditary claim to the throne to take it.
True, with all the intermarriage, everyone seemed at time to have some sort of claim to everyone else's throne, but you needed to have _some_ sort of legitimacy: the centralized, post-feudalism monarchy was still in the process of forming, and in most of Europe, you needed to win the local nobility to your side and, occasionally, the town-dwellers as well. Countries had a degree of legitimacy too: you might take some bits in a war, but you didn't usually just scrap a sizeable country long ruled with it's own monarchy. Extreme measures were occasionally taken against rebellious vassals or small or chaotic countries, but were not usually something you did when dealing with a monarchy of compable status.
So although Charles V beat the king of France and threw him in prison, he didn't try to claim the French throne: whatever distant kinship he may have had didn't give him any legitimacy to the French. And didn't put a pro-Habsburg claimant with better dynastic claims on the throne of France (and even if he had, said fellow's children would have been of dubious loyalty): France was too strong to be a puppet. And breaking up France into a bunch of weak little states or taking over and ruling with brute military force like the British in Ireland, or, later, the Austrians in Czechoslovakia, was probably beyond his thinking.
Or, to put it another way: in his cups Charles V might occasionally fancy himself as Emperor of Europe, but just in the sense that the other (Catholic) kings would pay fealty to him: not that their countries would be run from wherever his capital might be. (Unlike his son Philip, Charles was often on the move).
Bruce