I've always thought that the ship cap should be a reasonable soft-cap (and no, "one ship over some limit = astronomical cost" isn't a reasonable soft-cap; a good system should be a gentle curve starting at
one ship).
I think it's interesting seeing the "too many ships is bad" argument, though. That hasn't been my experience, playing my mod.
I think the issues here are several:
On the performance end:
1. The AI can't handle what's going on and the CPU load is high. That's pretty difficult to avoid without multithreading the AIs, but it's
certainly not impossible.
2. There is a lot of additional overhead on the graphics side that can also be multithreaded, and using more texture atlases would help a lot. That's also been done, to some extent (although I did not implement such systems for ship drawing, etc. because it didn't seem like it would help, given how the core works).
3. Wrecks shouldn't just stick around forever, eating up precious CPU on collision tests.
4. Friendly fire largely is a negative aspect of gameplay. Unlike ship-ship collisions, which largely prevent stacking without FF, friendly fire largely just creates opportunities for players to make mistakes and for AIs to very occasionally wreck friendlies. It also costs a lot of CPU per frame to prevent (more than normal auto-aim). I'm not sure that the benefits have ever outweighed the costs. It also has made it extremely difficult to give AIs access to weapons that can deal a lot of damage but aren't hitscan (Reapers, for example, which the AI hardly uses).
On the gameplay / UI end:
1. The lack of formations makes it artificially hard to use larger numbers of ships in an organized way.
2. The Command Interface is difficult to read and use, and doesn't convey all the information it should. For example, we can click on a ship and get some basic information about it, but not its facing, and facings aren't displayed in the main UI. Fighters and missiles don't give useful information about their facings or velocity, etc.
3. The AI isn't organized around formational tactics and has no sense of role. Merely having Variant roles like "flanker", "support", "sniper", "assault", etc. would be helpful, but we don't have these things, so there's nowhere to go, in terms of developing AI that responds a little better. We've had a couple of mods add Hull Mods that sort-of do this, and I think that's useful.