I've known for some time now that Starsector will never be a 4x but I would like to see the sector "react" to various stimuli.
For example, in my current game, I have a 7-planet empire across 4 systems that are absolutely dominating the markets (and the biggest planet is only size 6). I've warded off my fair share of expeditions and raids but considering the near-monopoly I'm beginning to have over most of the major commodities, I would imagine my upstart empire threatening the status quo in the Core Worlds would cause more...concern...for the major factions. To have a declaration of war declared against me by one (or all!) of the factions, for economic reasons, would seem par for the course in a cut-throat, decaying, sector.
But it's not just the giant fleets of doom that need to be factored in, it's the materiel cost for launching such an attack. If a major faction declares war and sends war fleets, there ought to be a window of opportunity to strike when they're vulnerable or counter-attack with permanent ramifications or, at the very least, some sort of "cost" that doesn't just go away as soon as the simulation spawns a new defense fleet (As an aside, that is possibly the most disheartening part of the game currently: I wipe out a giant fleet and lick my wounds only to see an equally large fleet spawn over my target at no cost to them). Again, these are triggered events rather than some dynamic AI decision but perhaps there is some granularity when it comes to what exactly triggers the event so it can't be entirely gamed.
The more of these triggering events that cause progression toward some goal (I really like the term "pressure" to describe the impetus to drive the player forward) and the more of these events that permanently shape the Sector, the more "alive" it will feel without it actually being dynamic. Or to put it another way, if such events were both qualitatively and quantitatively sufficient, some trivial/small-scale dynamism would be enough to complete the illusion.
I hope that's the direction the game will ultimately shape into but of course, I'm not putting all the hard work into it!