I do really love this little gem of a game, I love the fact that you focus on excellent gameplay and do not get bogged down with the often poorly understood doctrine "more is better" -- a doctrine that is quite frequently quite false.
Be that as it may: Currently, I have to work very hard to set up a game that is both enjoyable and challenging, to a large degree because the Diplomacy feature is vastly, vastly suboptimal.
The Problem: 1. Compared to any other constraint the game offers, it is far too easy for the player to befriend and then, eventually, win with Diplomacy, while the AI seems to have no such ability on its own. Once the very beginnings of the early game are over, and the player has convinced her neighbors that she is not pitifully weak prey, the AIs are more than happy to make deals with you, also because the system rewards (quite correctly) egoistical self-interest: You get more out of trading and not killing each other than war, at least until midgame. By this time, the player has stockpiled a large sum of diplomacy points. It's trifiling to offer supposed opponents so-called alliances. Of course I never do this, because it is still fairly easy to get enough votes for yourself without their help, but so be it. The AI, however, does not seem capable of offering Alliances to other AIs, at least I have never seen it happen. This gives an advantage to the player and a massive disadvantage to the AI. 2. The "alliances" are not quite what they seem to be: Engaging in an alliance with Faction A will not have any repercussions towards the player with any other factions that may already be at war with Faction A, that is: If A and B are at war with each other, and both are friendly to me, I can enjoy the benefits of trading with both while they whittle away at each other; interfering with this balance should have some repercussions for me, that is: By allying myself with A, then I should immediately become antagonistic with B, all of my deals with B must end and B must also declare war on me, since I am now the "full military" partner of A. But this is not the case. Engaging in an alliance has no drawbacks whatsoever. By the time mid-game is over, I have buckets and buckets of unspent diplomacy points, and could easily just choose to ally with all of the bickering factions simultaneously.
a. Make engaging in Alliances amongst AIs much cheaper (perhaps there is a bug and it is not enabled?), and for the player much more expensive, significantly so in harder difficulties.
b. Make alliances such that engaging in an alliance causes you to become the enemy of your ally if your ally has an enemy.
c. Failing that, disable alliances altogether.
d1. Consider allowing military partnerships in alliances, but allow the player to select an option by which the ally no longer votes for the player in the consortium. Allied AIs can however vote for the strongest partner in an alliance without a human player. Consider pairing this with:
d2. Greatly enhance the "we are worried about your rapid expansion" factor once your population value is large enough (smart math people: insert nice algorithm here) to be considered a threat in that extrapolating your population growth would appear to have you be able to gain two-thirds of the galaxy vote by yourself such that the closer you come to dominating the vote by yourself, your threat level grows exponentially to non-allies. This should have some impact on non-allies of you to such an extent that they have a stronger incentive to form alliances of their own.