They were dark times.
In the earliest days of the conflict that would later be dubbed "The Last Great Time-War" the Time-Lords of Gallifrey did see a great war on the horizon, they had given a task to a particular one of their kind known as "The Doctor". The highest authorities on Gallifrey knew that the upstart Daleks would one day threaten them, just as they had threatened the planet Earth and the universe at large so many times before.
It was for this reason that a plan was hatched to destroy the Daleks at their inception, to send one of their kind backwards in time, to the day of the Daleks' creation in an attempt to wipe them from existence, and save countless planets (And Gallifrey) from extermination. It was agreed that The Doctor be given this task, as he had been the one to discover the Daleks, on the day of their creation no less.
So it was that The Doctor was sent to Skaro on that fateful day, he reached a position from which he could abort The Daleks' creation...and yet he relented. It would later be speculated that The Doctor's unique brand of conscience caused an emotional crises at that moment, he left Skaro and allowed history to progress unimpeded.
Upon his return to Gallifrey, he was berated and belittled by the High Council of Gallifrey and the mission was deemed a failure. It was decided that due to the possibility of multiple versions of The Doctor now being on Skaro during the Daleks' inception the mission could not be re-attempted.
The High-Council may have known at that moment that war was coming, maybe they knew that they would need strength and a firmer hand than their Lady President, whatever it was; they approached the then-President of Gallifrey: Romana. A plan was hatched, Romana going along with it more out of desperation than a real faith in the plan itself. Rassilon, the first Lord President of Gallifrey, a legendary figure to Time-Lords and ordinary Gallifreyans alike.
Rassilon's body was retrieved from The Death Zone, said body having long since died. The skeletal form of Rassilon was brought to the Presidential Palace, through Time-Lord science Rassilon's body was restored, almost instantly regenerating into a younger and decidedly more clean-shaven appearance than the one he had sported in the Death Zone.
His immortality seemingly intact and his mind fresh, Romana was forced to step down from her position as Lady President, a position which Rassilon swiftly and eagerly assumed. In the coming days Rassilon began to prepare, fortifying Gallifrey with Sky Trenches and Battle TARDISes and all manner of war-time defensenses. War was coming, and he was preparing for it's arrival...