My first game on painful, the drengin were craaaaazy.
I mean, for three years I fight them with all I got, I have to put 100% in military production, and landing crafts are so few that I use mass drivers on every invasion. It takes two wars to push them back, destroy their fleets uttterly, have them beaten.
So then, in the first time in three years, with twice as much planets now, I can spend money on my economy and my research. The rest of their planets is too far away to be a bother, they got them from the Korx who decided to surrender because they were getting beaten by the altarians, who were twice as high as the next powerful military rating.
I get involved in a war against the Arceans, while the exceedingly weakened drengins get attacked by the Altarians. Here I think that the drengins, with no ships left, are gonna get wiped by the strongest force out there. Wrong. By the time I finish with the Arcarians, I notice that the drengins and the altarians switched places on the military graph, and that the altarians lost 6 systems and are begging me for aid. The Drengins had completely re-speced their fleets, and they had even more powerful ships then me (!!).
Of course, with the full forces of an empire that conquered three others, I was able to take care of them rather easily in end-game, but it's still incredible how they got back from the brink of death to take out the strongest player.
On another note, I think the reason altarians and torians do better on lower levels is simple : when the AI is running at 25% of economy, and one race has +15% to economy, it makes a much bigger impact going from 25% to 40% (nearly doubles) then from 100% to 115%. What do you think?