OK, I got the main bugs / issues dealt with.
I think Glaug are perfectly beatable now that I've toned Armor Regeneration down quite a bit (it's still powerful, but not invulnerability); if anything, they're feeling a little UP again atm, but I have only fought them in small battles and watched epic AI-vs-AI battles in the sim so time will tell. In player hands, they're probably very hard to kill, but that's OK.
Diplomatic results are handled a little better. One of the issues was that each Faction's relationships weren't, er, terribly clear; the typical example of having to fight Tri-Tachyon just to see your relationship with Hegemony go in the toilet was probably pretty frustrating and un-fun.
So here's how it's going to work:
In the Fleet dialog, from here on out, it'll tell you which Factions they're Allied with (i.e., those Factions will also dislike you attacking this fleet, for sure).
Each Faction will be Allied with one other Faction and will be enemies with two other Factions, and neutral to everybody else. This relationship isn't perfectly mirrored; one faction may hate a faction that is neutral to it (although I haven't made any of them like a faction that hates them).
If they're neutral to the player, they'll react according to whether they're allied or enemies with that faction, generally going in the player's favor (if neutral to the Faction but friendly to the player, rep goes up). That will keep things simple. If it turns out that this is making it too easy for players to make all their relationships positive by playing games with attacking certain factions (which shouldn't work, but I haven't triple-checked all that logic) then I'll fix that; generally, engaging a new faction should be fraught with peril, in terms of poisoning your relationships- that this can lead to a game being lost if players act like brigands and just attack whatever factions they feel like instead of thinking about the consequences is not a bug.
Other stuff:
Factions will not be able to capture Stations quite so frequently through the abstract battle process, so that the beginning of the game isn't "ooh, all the Factions are dead, now what"; new Stations cost 200,000, since 1,000,000 appears to be a fairly grindy target with the changes to money, and will give players some credits every week, so that they're good for something besides irking all the Factions in that system and helping to win the game. Lastly, this isn't "fair", but when a Faction only has 3 Stations left, the AI will never defeat it, ever, unless it's local. So no more "oops, I just won" nonsense; players will have to go win on their own.
Oh, and since the Boarding Shuttles are awesome (bringing dead ships back to life, as it were) I've decided to make a weapon that can be bought that does something similar, called the Transporter Device.
I'm also going to make the Boarding Shuttle AI available to players as a custom AI and will probably make more boarding craft at some point so that other factions besides the Pirate Kings can have them.
Yes, that means you can have a Destroyer or fast Frigate whose job is to resurrect dead ships, whose AI will act appropriately. Same principle will apply to healer ships when that's done; I'll probably also make a shield buff ship that drains Hard Flux or something.
Anyhow, that isn't done yet, but I'll push out a release pretty soon to address the stuff regarding faction relationships and the balance stuff as soon as I've gotten a chance to test it out reasonably thoroughly. I think that gets rid of a lot of the yucky bugs and "oops, I've just lost, why" issues.