Why not clone Gratuitous Space Battles for use as the space combat engine? (Yes I realise it's been suggested before). In GSB, you can set policies for your fleet before you begin (to tell damaged ships to fall back, or for ships to shoot the same target at once, fighters to stay close or chase etc) but you have no control once the battle begins. You just watch. If you don't want to watch, I'm sure that a modern PC could accelerate a GSB-style battle so it takes place in a few microseconds!
I've only been playing GalCiv2 for a couple of days. But already something I miss from MoO2 was being able to specify different mounting options for my ship's weapons. Deciding whether to have five heavy-mount forward-arc laser cannons, or just four in larger 360° mounts, added richness to ship design in MoO2. It didn't matter that the graphics were completely symbolic, a fixed bitmap sprite whose weapons always fired from the exact centrepoint.
As for the AI being intimidated by your stack of basic fighters - a more advanced system of evaluating strength would be needed. The AI should ask itself 'Who would win in a fight - one of my navy's fleets vs the other player's fleet?'. This would mean the AI evaluating what of its own ships and its opponent's ships are likely to meet in battle, then run a simulated accelerated GSB-style battle a few times to see who's likely to win. This happening silently, in the background, as fast as the processor can do it. If it discovers that your typical navy unit of a fleet of small fighters can consistently evade the anti-capital-ship turbolasers of its typical cruisers in a GSB-style battle, then a) it should recognise your military strength in diplomacy and b ) it should try to provide defence against your known technology as it updates its fleet. You could have the same AI on your side, as your military aide.
As for ship design - I can't remember if this is in GSB or not (I didn't play that game for very long) - but using the Metaverse, it should be possible for successful player-created ship designs (and fleet strategies, if GSB-style battles are implemented) to be propagated across the Metaverse to be used by the AI in other player's games. By design, I mean weapon and module configuration, not the visual model, and the set of tactics chosen in a GSB-style battle. Amongst other things, this would be a great incentive to own a legitimate copy of the game so you can connect with the Metaverse and have more challenging opponents than a statically-generated AI can provide!
edit: I hate smilies.