(BTW How does the AI ship creator work? Does it produce good ships that use the tech you have, or does it produce crap?)
I've found that the AI ship creator places more components than possible on ships
, at least in my games. It'll have the max # of weapons possible, but then it'll stick on some life support even though there isn't room! It forgot to add any engines, though. It will use the best tech available, however.
My typical strategy is to only build my military up when I see the AI has started doing so, and then to just try to keep even with them so they don't attack me. A good-sized military gives you a diplomacy advantage as well.
I hit the economy tech branch first, then work on getting advanced research techs while my new econ buildings are going up, then research industry while my new labs are being built. By the time the AI has some decent military techs I'll have a bigger economy/industrial/research output than them, so it doesn't take me long to pump up my military for an invasion.
Also, bigger isn't neccesarily better. Another viable strategy is to use an industry-strong race and just focus on having way more ships than your opponent. Keep in mind with this approach you need to start conquering before the AI gets a tech lead, and to really focus on early economy and population to support all those troops and conquered colonies.