I've had a large number of small scale battles now where the AI ships just circle around each other and never get close enough to actually fight.
This is disconcerting enough, but it became a real problem when I engaged a single enemy Paragon while piloting a hyperion frigate, accompanied by my AI friend in a Venture.
I tried every combination of orders, from setting the Paragon to an all-out attack target, setting AI to search and destroy, placing a defend point or rally carrier point directly behind the Paragon, and my Venture friend will not come close enough to fight at all 9 battles out of 10. It just flies forward, then backs away indefinitely just before entering fire range, even if I'm already fighting the Paragon, and even when the Paragon is turned completely around.
The one time I did manage to nudge the Venture within fighting distance of the Paragon, it fired its light needlers from too far away, about twice the needlers' weapon range. The ship slowly lurched back and forth, still way out of range, wasting its needler ammo and missiles.
I don't know if it's a problem with the needlers, or if the cowardly AI behavior made it waste its ammo, because the Paragon would often blast its heavy needlers way out of range too, as the Venture bobbed uncertainly just short of closing.
The latter example was done with higher level crew in all ships, if it matters.