This is the single biggest issue I have with the game (although not the only one).

To me the nonsensical nature of the AI's approach to war is just shoddy coding, using hyper-aggression to mask an otherwise unimpressive AI.  It simply makes no sense.  Having the AI behave irrationally is not the same as having a difficult or clever AI.  Think about it.     What sort of brain-dead leader would declare war when there is no benefit to do so?  The AI will declare war long before it has the fleet to reach you, before it even has the tech to launch planetary invasions.  

The Japanese announced their intention to go to war with the USA by attacking Pearl Harbor and following it up with a quick invasion of multiple of the pacific islands.  When they reasonably thought they had both a benefit in war and the means to execute it, not just as soon as they met an American.

Next is the difficultly level.  The AI being in constant war with the human might be ok for the highest difficulty levels, but this irrational behavior occurs even at easy.  Making the game more difficult to play is not a good way to loop in more players.

In my recent game I found the AI to be indeed more aggressive:

had the Drengin attack the Snathi first and take over a planet near my borders. Then the Drengin attacked me and took two of my planets. I managed, sort of, to reclaim my planets after a devastating war. I suppose this weakened the Drengin a little bit, because a custom faction I made, made an attack on both the Drengin and the Snathi and took over all their planet. I was a bit shocked I suppose as this was the first time something like this happened in my games. It was a pleasant shock as it means the AI is improving (this was at the same difficulty I usually play at).

In my last game, the AI was impressively mellow. I actually casually reached and alliance victory without even trying. Everyone was suddenly close to me. What really bothers me is how in the world does the faction rating even work? It seems like it relies entirely on military power, which is pretty stupid to me.

Sure, the Altarians have a power level of over 90000, but all of their ships are pretty crappy, they have a debt of over -90000, and average rating for everything else, like social manufacturing, research, etc. And yet they have the number one spot in power.

Not sure on this, but i do not think they can.  Debt was prob the result of an ideology pick that gives expensive ships/planet (bad implementation imo), at which point the were shut down

Having no money only affects the ability to research and build. Ships can still be moved and attack other ships.

Also they could have accumulated a large role forward of mfg points which can let you continue to build ships until used up

They were definitely producing lots of medium and large ships...

Can confirm the aggressive AI. Played one game on 1.4 and the Drengin and a custom race declared war on me around turn 100. Problem was they are nowhere near to me. We are now blazing over turn 200 but these two aggressors  are still way out of reach for any kind of ship to reach. They did not bother or could not research and build ships that can reach me, nor offer peace. Interestingly they are only in war with me ignoring all the other 30+ races

Really glad the AI gets an update next. It needs to be more aware of its surroundings and follow a victory goal working against competition even if it is another AI. It is very easy in the current state to get along with everyone except for the one or two warmongers. The AI also needs to be able to for alliances with another AI - Have never seen such a thing in any of the GC3 games I played yet. There are also several type of alliances but did not notice yet what the point of them is though they get the imagination running like wild - so many possibilities. Wish we could work in a meaningful alliance with other AIs fighting against an opposing alliance while some CIVs manage to stay relatively neutral

Another thing I have noticed is the exploitation of the AI with Exploration Treaties for money, resources or tech. The more AI are present on the map, the easier the game actually gets. In some of the turns the player can milk all the money off of AIs that are relatively friendly earning tens of thousands of credits just for sharing exploration data for a short period

It is not tied to difficulty. I play on godlike all the time, and the AI are more likely to declare war on each other than declare war on me. It has to do with your ranking. If you are much too weaker than everyone else, the ones with ideology opposite to yours will most likely declare war on you, unless your diplomacy stat is really high.

You may be right, but just so I'm clear it was the only godlike.  I had about 30 or so other genius AIs in that game and no matter what their personality or ideology was they all liked the godlike AI.  I guess it could just be that the godlike AI was way ahead in diplomacy tech and had used its size to build lots of diplomacy buildings.

I tried to find the bonuses the AI gets in the xml files but had no luck.

My games are all Normal as that is the level the AI does not get any bonuses in either direction as per my understanding.

Wouldn't exactly say that the AIs are overly friendly with each other, in my experience they are overly hostile OR friendly with the player. They either declare war on the player without any chance of ever reaching one of its planets not to mention occupy it, or they are so charmed be it due to trade, diplomacy bonus, ideology or other that they will never declare war.

The main problem I saw that each AI is evaluating only according to the parameters we see on the summary which is good as that makes it transparent but bad as there are far too few of it (take TW Attila as a good example of how many different parameters can be used here to evaluate there stance towards each other and the player). Some of the AI "personalities" could even get traits like trustworthy or despicable backstabber to occasionally overwrite these parameters based on math (6 points=I like you). Now that I think of it the later is kinda the essence of personality

In line with the above, the AI can dislike the player as much as it likes but declaring war on it just based on the attitude is probably not wise - There is a good chance this is not the case though as there are always a few other races that dislike my VIC strongly but they do not declare war.

I'm finding the same thing with v1.4. I started a new game last night with all AI's on normal. When I finally met my 1st AI, the Dregan, they were about at my level but slightly above. 60 turns later, they had twice as many worlds, twice as many starbases, 3x's the ships and now had a higher tech level. Even though I had only met a scout, they immediately declared war. I then met the Alterains and Iconia's which also had 2 to 3x's everything I had.

I'm not a new player to Civ. I've owned every game up to this one and have over 300 hours in this game. While I've lost a couple of games, I've always been in the top of the list throughout the game even playing on high levels. There is definitely something going on. 

For example, when I first met the Iconian's they didn't have medium hull tech. I didn't trade it to them (my game has tech trading off), yet 25 turns later they not only had the technology but built 10 ships while I had the tech and had only built 4. Not only did they build 10 medium hull ships during the time I was able to build 4, they also had about 10 other ships built.

BTW, since I was considered the weak military member, all other AI's immediately declared war on me. I'm starting a new game and I'm going to watch the other Civ's using the FOW command on, just to see how they are expanding, but I strongly believe something is amiss, my skills haven't eroded that much from the last time I won a few months ago.

Yeah I have seen this behavior as well. Even on beginner difficulty the warlike races will send wave after wave of huge stacks of ships at me. Never seen anything like it in GalCiv2. Seems broken.