I've rebuilt the combat model with the following changes to core gameplay:
-doubled damage on all ships except siege and LRM
-halved the hull and shield points of LRM frigates
-decreased the angular acceleration value of LRM, siege frigates and stationary turrets to 0.5
-halved the top speed of all ships
-drastically increased angular acceleration values for all ships using fighter attack
-reduced the top speed of capital ships to one quarter of original
The LRM got hit because they were too powerful otherwise, especially against the AI which doesn't seem to think they're much of a threat. As a consequence, the LRM is now useful for demolition work and massed missile attacks against less mobile forces, like capital ships and stations. They *will* lose against an equal force of assault frigates. They don't move, they're fragile and they turn like WWII tanks. They still pack a nasty punch though. I thought these guys were nerfed by IC, I can't imagine the havoc they wrought in multiplayer before...
All ships which use fighter attacks can now turn rather sharply. This may *sometimes* look a bit off, but it allows for two things to come into play: one, the ship inertia is more visible. Two it allows for some very cool dogfights to occur - I've even seen two ships trying to circle-strafe each other until one of them ate a laser volley from another passing attacker. I saw a cruiser latch onto the tail of an attack frigate and smash it to pieces. Cool stuff like that. Makes the battle seem really alive.
Capital ships were always too fast - now they're not. 
Increased damage means that sometimes battles can be short and furious. But the overall battle length is somewhere around the original - naturally this now depends on many random factors and not-so-random factors such as the positioning, grouping etc.
Outstanding problems: none major, the combat model looks good and feels good, haven't had the chance to test it on some truly major battles, that's what beta's going to be for. One issue is that ships using fighter attack sometimes hang up on planets or (colonizable) asteroids. This is rare, and giving them move orders solves the problem. Also, can't stop ships hitting the stationary objects they're attacking, like orbital modules and capital ships. Its less obvious with the increased turning speed, but it's still there. Doesn't happen all the time, but it happens... I don't think it can be prevented without also preventing ships from passing each other in a head-on pass, which is essential.
P.S.
Kibbler, this mod is currently for Entrenchment only, as there is no necessary code to allow fighter movement for ordinary ships in the vanilla Sins. Rumour has it that IC might bring that coding to vanilla, and if that happens I will have this mod support vanilla Sins as well.