I didn't know that this "know everybody now" wasn't normal. Now I have to think about it.
Since the AI empires are not in contact with each other, I feel it gives the player an advantage. The possibilities for tech brokering are phenomenal, but the diplomatic options are also very strong.
The cheat to reveal the entire map gives the AI empires contact with each other (as indicated by the Treaties window). However, I have no idea if the AIs will also have a fully revealed map. If so, then I guess its balanced, except for sensors being useless. If not, the advantage to the player is probably too much to allow a real game.