I've given the Beta 5a Thalan a shot in a game today, and I think given a very narrow range of game set-up options, they can be comptetitive.
A brief AAR (mid-action report really):
The game I'm in is a abundant-all suicidal medium with 8 minors and Altarians, Iconians, Arceans, Korx and Yor as opponents. I intentionally avoided races with diplomatic bonuses (to minimize the Thalan diplomacy penalty) and races that are aggressive early, specifically the Korath and Drengin (to minimize the danger of the slow start). Tech trading is on and research is set to very fast. My race points were spent on +30 econ, +10 morale, +25 luck, +25 creativity and +10 weapons and I took the universalist party, which I believe suits the Thalan perfectly since they need all the pop growth they can get.
My starting planet had only a morale bonus. Not great. I did have a pq17 close, so I made that my first priority. It happened to have a +300% industry tile, so I built the Hyperion Matrix there along with the +50 planetary morale wonder. The +25 econ wonder went on my home world. In the colony rush I ended up with a total of 6 planets and a morale resource. The other empires had between 12 and 20 planets each.
As to my geographic position, Thala was a few tiles away from the southwest edge of the map (more south than west). I had the Arceans to my east, Yor to the northeast but further away, Altarians to the direct north, Korx to the west and Iconians to the northwest.
My first research priority was the universal translator, so that I could trade technologies. I had hoped to get to Diplomatic Translators in time to build it, but the Altarians got there quite quickly. The Thalans start with a decent mix of technologies, so I was able to trade for some important early techs such as the econ tech that gives trade centers and +10 econ, xeno labs, planetary improvements, laser 1 along with beam weapon theory and space weapons, space militarization (the most important of all of them probably, since the Thalans desperately need recruiting centers), space defenses (which offers +10 defense and isn't in the Thalan tech tree), trade and a few others. I made early contact with several of the minors, and that was vital for tech trading purposes early game.
My next research priority was Xeno Ethics. Since the Thalan do not have concepts of malice in their tech tree, I felt that to achieve a decent economy I needed morale high enough to have a decent tax rate while still maintaining 100% approval (which means going neutral for the +15% base morale bonus). This is an expensive tech, so I put research to the lowest level that would still give a time to completition and kept it there while I was expanding, counting on creativity to eventually come through for me. Eventually, it did.
I built the Harmony Crystals on my p17 with the hyperion matrix on a +300% industry square, my economic capital on my homeworld, and then the restraunt of eternity on the industry planet (mostly for extra tourism income, since money was a little tight). While all this was building, my other planets were building trade centers (with the exception of one world with a +100% research bonus, which got a xeno lab).
Once all this was done building, it was time for my usual strategy: Blitz my nearest neighbor (so long as that neighbor is not equipped to defend itself). I went to 100% research and researched up to medium hulls (which creativity got for me). I built Xianthium Plating on my industry planet, and then switched back to 100% research to planetary invasion. In the Thalan tech tree, advanced transport modules come directly after planetary invasion, so I grabbed that as well.
The Thalan have really weak ground combat techs (which is a significant problem with the race). I'd traded for war colleges, which gives +5 soldiering and +1 logistics, from a minor race, and researched basic logistics. The remaining problem was knocking out the defender, which was using beams. I caught a break then: The galactic senate voted my empire as the home for a galactic prison, which doubles the industrial output of your highest industry world. After I traded for xeno industrial theory and built my industrial capital, my industrial world now had close to 400 military production/turn. I'd traded for advanced deflectors and built a couple of medium fighters with one laser and several advanced deflectors.
I was able to conquer Altaria with a fleet of 2 transports with 2000 troops each using information warfare. If I had been unable to take Altaria, it would really have hurt. As it was, I was successful and got the Diplomatic Translators. The Iconians of course declared war on me when I declared war on the Altarians, but they were slow to develop a military. I had traded planetary invasion to most of the minors as well as to every major with the exception of the Altarians. I was able to get the Arceans to declare war on the Yor, got a few research treaties and plugged a few more holes in the Thalan tech tree.
From then, it was pretty clear sailing to the present time. I rolled over the Altarians, agreed to a peace treaty when they had 2 planets remaining in exchange for all their tech and some cash, and am currently taking Iconian worlds. I've got around 25 planets. Once the Thalan get rolling, picking up techs, industry and research capacity from conquest, they seem pretty strong. I got the combat tech that gives tir-quan training from an Iconian world I invaded, built that, got the tech that gives aphrodisiac from the peace settlement with the Altarians, and built that as well. At this point (october 1st of the second year) I'm completely certain I'm going to win (if I choose to play this game out).
So are the Thalan ok? Well, only given a good start, a carefully selected group of opponents, carefully chosen galaxy settings at start up, many minor races, tech trading on, creativity, neutral alignment, and a close neighbor that can be caught before they build a meaningful military. I still think they are the weakest race in Twilight. I don't think they are as weak as I had previously believed.
One thing that would help them is if they were given back the +25 starting econ they had in DA. I also believe that there is no longer any reason for them to have 8 race points instead of 10 at race design. I don't know as it is possible to make them viable with tech trading off. It would also be helpful to them if the diplomacy penalty was not so severe and they had better ground combat technologies. In particular, space marines or tidal disruption would really be nice. I have no idea why they do not have planetary defense, either.