I had this thought just now while I was finishing up my first Twilight of the Arnor game.
I was playing my custom race, the Nonsequiturians, on Challenging. Thalan tech tree. Other races were: Korx, Terra, Arcea, Toria, Korath and Krynn on a large map with tech trading off. Terra and Korath stayed weak, and Krynn took out Korx in middle-game. They started dominating on military and influence like they do.
Anyway, I chose neutral, and my big tech lead and solid defensive fleet made Krynn want to ally with me. I hadn't been expecting that, but I felt I had to do it because I didn't see a way to take them out in any other fashion. They just had too many ships and too much influence.
So Toria started going for the ascension victory, and I decided to take them out. While I was doing that, Krynn obliterated Terra and Arcea in about 20 total turns, leaving me, them, and a very weak Korath. I then took out Korath for the diplomatic victory.
I guess my point is, what if it had been the other way around? I could easily have sat on my hands and waited for Korath to get conquered by Krynn... while I did my laundry or something. I didn't actually try that, but if I remember right, I've seen it happen that way before... and I think I still would have won the diplo victory. Am I wrong? I've never seen the AI win a diplomatic victory, and by definition it would seem impossible since once there are no wars and everyone is allied, you win. I almost want to say that the game should award the win to the race that conquered the most others, or assembled the most alliances.
Plus, the whole alliance setup seems unbalanced. I can ally with someone and then spy on them, select an opposite alignment, pay others to attack them... I've never seen the AI break an alliance. The only way seems to be if you do it yourself.
If I'm wrong, chime in... but it does seem unbalanced. I'm thinking about turning off diplo victories from now on.