Definitely up the difficulty setting. From the way you play, i would try to go straight to crippling and you will probably increase it even further.
At crippling difficulty, i had the drengin research all the mass driver tek and when i saw their ships with 96 Mass driver attack, i almost fainted. But i was the best researcher so in no time i got pretty good armor against that and good weapons too. Too bad the drenging didn't attack me directly.
All in all, i have to increase the difficulty level still because i get some stupid behavior from the AI. Like declaring war on me and going to attack another ennemy instead seems to be the norm.

Upgrading all your scout? Why? You could have created ships from your planet with less cost. Well, if you did not know what to do with the cash i guess it was reasonable.
See ya!