See, I'd take in the massive fleets battling out straight away for more loot, doesn't necessarily mean its not 4 separate lasers fighting does it?
Wat? EDIT: Oh I got it now, took a couple re-reads.
I think free for all would be useless anyhow, strategically speaking. If you see two enemy factions fighting each other, maybe there should be a possibility to wait until the end of the battle to finish the surviving side off, to be able to pick up the loot of the losing fleet that was left off by the winning side.
I don't think the uselessness of a free for all really matters. I think it's important for players to have more choices to make throughout the game, and some might be less efficient routes to victory, but possibly more fun at the same time. Also, there should be a possibiity of a third faction entering an ongoing battle you're already engaged in, and choosing to fight on it's own side (this could be paired with the campaign map being simulated while in battle at greatly reduced speed, and maybe a way for the player to check on it and see if anyone else nearby is looking for a fight right away).
Even if this does seem very tricky to impliment considering ship AI and the like, I think it would be worth working on for more immersion. How well would the AI handle it if it just treated the other sides in a battle all as the same side?