Just wanted to echo the OP's comments, and add a few others:
I agree that the "conquer everybody with fast transports" exploit should be remedied. Whether or not the pirates are too powerful is a separate issue (I've had them in several games, and only had them really destroy the game once. The other few times, I've managed to fight them off, but only with literally years of game time to clear my own sectors). My problem with the event is as follows:
I would emphasize what Wheeloffire and JonSarik said above -- the pirate behavior with this event is entirely un-pirate like. Pirates rely on the ratio of plundered resources to non-plundered resources being low enough that the economy and trade environment can survive. That is to say, as much as pirates take advantage of regular commerce and trade, they also rely on it. Pirates don't create wealth, they steal it, so they need other people to have the wealth so they can plunder it.
One or two pirates attacking trade lines is normal. A whole fleet of overpowering pirates annihilating everything in their path, galaxy-wide is something else entirely. Ordinary pirates wouldn't do that -- it wouldn't be sustainable. They'd smack all the military, trade, and transport ships, and then.. having nothing to plunder.
Since the pirates don't have the resources for planetary invasion, they couldn't be trying to take over worlds. One plausible situation, though, would be for the pirates to take over the trading lanes, then demand tribute. Civilizations who negotiated terms with them could resume their trade, transport, colonization etc. activities (at a presumably steep price that could involve money, ships, starbases, etc etc -- any kind of tribute), while civilizations who refused to deal with the pirates would be isolated on their worlds (unless they could successfully take on the pirates). The pirates could even be given the ability to "take over" some starbases, converting them into limited-use facilities for regrouping, refitting ships, etc. Pirates could be made a sort of special-circumstance faction or minor race, with their own rules and abilities.
Anyway, the possibilities are endless, but as MarshallONeil said above, in its current incarnation, the pirates mega-event is stuck somewhere between infestation and invasion. Too much firepower for casual pirates, not enough firepower to take over planets.