Thanks for the thoughtful response.
Yeah, uh, this is a really interesting set of issues. To start, I'm pretty sure both Alex and I consider the Persean Sector to be a dystopia. Heh, a thought: like take Star Trek inverted = Starsector.
I love star trek and I really respect (increasingly, these days) its optimism but it's definitely neat to sometimes be reminded (from the remove of fiction!) that good outcomes are also not inevitable.
[...] the dystopian state of affairs is not [...] inevitable, [...] Domain policy which kept its colonies reliant upon its central authority caused the Sector to be ill-equipped to handle the collapse of the Gate system.
Basically as a player i only hear good things about the domain. the domain lead to peace and expansion; whereas post-collapse autonomy led to chaos. So the message is: "People become savages when there is no central authority." This is a trope of zombie movies and reality TV shows (neither of which I credit much). Also, the domain collapse, to the player, is a mysterious "out of context problem," which eclipses the theme of hubristic overreach as a sin leading to the sector's current condition.
But you say that's the opposite of your intended message.
I'd suggest making the domain overreach/hubris a bit more overt. I won't presume to tell you how though!
[...] The player is rewarded for being pretty awful,[...] I'd like to aim for a place where the player feels more like a Han Solo figure, [...] And I'd like to add more interactions with people and beliefs in the world, and have the game acknowledge/judge what the player has done for good or ill somehow.
I'm glad to see you're moving things in this direction. But Starsector's scope (fleet, rather than individual ship), and the rapidity with which you progres, rules out Han Solo. You quickly become a small but pivotal actor in the sector; more like Histiaeus of Miletus in Herodotus than Han Solo (have those two have ever shared a sentence before?).
Most players are locked into the bounty trap-- keep getting more cash to supply larger fleets (to fight larger bounties, etc etc). They become mere thugs for one faction or another, but the combat never does anything. The bounty system itself seems disconnected from the dynamic economy; a relic of an earlier version of starsector and an unsubtle mechanism to generate combats.
If the economy worked for trading, if it were possible to create outposts of civilization, if there were more "good" things to do with force, it would help. It might be interesting to apply economic and military force to create truces between factions, etc. Sounds like you have ideas already.
To be perfectly honest, the ultimate goal of Starsector's worldbuilding is to create a backdrop for a certain set of gameplay mechanics: space combat plus power/wealth accumulation in a manner that gives the player as much personal control over their own fate as possible Because Video Games.
Whatever your intentions at the beginning, starsector is no longer just space combat and wealth accumulation. You've made a dynamic world, a place that feels alive, and outgrown the player base that was just focused on space combat. So it's also about telling a story with that world. The designers have latitude to decide what morality it imparts.
Also: your mention of SpaceSyria is interesting, [...] (Though Pathers are a bit ISIS-y, aren't they.)
Well the pather ships are green and some have crescents on them, so one does think of Islam.
The whole sector is Syria: A multipolar conflict so total and protracted that everybody lost absolute moral high-ground; rather some have even lower ground. Long, high-intensity conflict reaches a post-ideological stage where factions can no longer focus on ideology but are consumed only with the administrative and military details of their own perpetuation. That's the sense I get from Starsector.
That said, the game shouldn't say "these are good guys, these are bad guys." It should be up to the player to see the good and bad in any faction, and either decide to support that faction as the best medium for a re-injection of justice into the morally depleted sector, or to go their own way.