I think this game is a great concept, but there are several things which, in my opinion, make it no fun.
1) Enemy AI seriously overestimates the strength of your capital ships.
No, you underestimate the strength of yours. A full set of 5 levelled Vasari capital ships can brutally cripple three mixed fleets through focus-firing (Makes for some fun play around Gateway too)
2) The AI never builds any defences. Actually, the only time I have ever seen any defenses is around the AI's homeworld. Even then, it is maybe one or two things. Even hard dificulty level AIs will not defend their planets. Combine this with the above, and taking an entire empire's planets is trivially easy.
The defenses wouldn't help, look around the forum at the discussion going on about defense.
3) The "hard" AI is pathetically easy. I played a huge random map against all hard AI players, and never allied with anyone. The AI did not capture a single one of my planets.
Ok, and? You got lucky?
Fix these problems and it may just be a good game. As it stands now, it is no fun at all to play.
Have you thought about multiplayer? And somehow I just don't think upkeep-scaling is a dealbreaker on a game, I think you're just being dramatic. Get in line.