Not sure if you're still working on this Horemvore--but I finally was able to playtest this a bit. I used the improvement I posted above to call the Dread Lords event just after turn 100. I was in an immense galaxy with 11 opponents set on gifted.
The Dread Lords spawned nearby in the middle of the United Earth ZOC (within my travel range).
I didn't meet the Dread Lords until turn 122, but looking at the timeline, the United Earth faction's military experienced a relatively substantial decline and then they flat lined the rest of the 100 turns I played. Their faction power never rose above about 180.
The Arceans were nearby as well, and they seemed to fair better. They had larger fleets.
Around turn 150, the Drengin and Krynn declared war on me, so I was able to easily see their capabilities and compare them with the Dread Lords'. The Drengin were the top faction with a score of something like 1600 at the time.
The two best Drengin fleets I saw were at 32|4|35 attack and 110|0|0 defense. That was at around turn 170.
The Dread Lords had a fleet of 5 ships (maybe from their spawning, didn't check against the list above) at turn 134 that had 1786HP, 134|96|60, and 114|125|125. Later, at turn 185, they had a fleet of 7 with 175|112|84 and 127|139|157.
The Dread Lords planet had manufacturing of 538.3, research of 81.8, income of 35.7, influence of 254.6, population 30, and 59% approval. They were set to military subsidies. The planet was defended by 14 ships, and there was nothing I had that could've touched it. I'm not convinced any of the other players could have really dented their defenses, and they had dozens of ships and a half dozen fleets (2-7 ships) that I knew of roaming around terrorizing everything nearby.
In my opinion, your modded Dread Lords were competing with the top-tier gifted AI even though the regular factions had a 100-turn head start. Not sure how sustainable their advantage would be in the long term, but at turn 206, when I called it quits (between the Drengin, Krynn, Yor, and Dread Lords, I was surrounded and vastly outgunned), the Dread Lords were doing just fine.
Not sure if that's helpful info...