This mission is discussed in detail
hereBottom line, it's not bugged, it's just a huge pain in the ass.

Sounds like you're doing great with tech, at least. Don't ever use starbases in scenarios involving the Dread Lords. It's a complete waste of resources, the DL will run straight for it and blow it away.
The link discusses key strategies like having fast fighters to take out the troopships. Losing worlds and taking them back is perfectly fine in this scenario, each time you have a chance to steal a tech (hopefully with better luck than I've had - Space Mining I, Space Mining II, and Extreme Colonization). Best to do that exchange on undeveloped worlds, of course. I'd think you could get seven planets before the DL jump you - two in your home system, Cassius, K-something, Weber, and the two in your back corner. In my game the main fighting has been in that central system (Cordelia?) and the system which starts under Drath control.
Ships - big, all weapons, at least speed 5. I also find it helpful to spam lots of sensor drones (cargo hull, Impulse 3 engine, fill the rest with sensors). Fast enough to lead the DL ships on a wild goose chase, and gives you an 8-9 square radius field of view so you can see the troopships a couple of turns out.
Oh yes, spies are your best friends in Dread Lord scenarios. Blanket the Gladstone planets as heavily as you can to limit DL production. If you've got lots of trade routes to your allies you should be able to afford near max espionage spending.
Good luck!