Cargo hulls, which are available from the beginning of the game, only have 1 hit point.  They are not intended to be used as combat ships, but instead are usually used as freighters, constructors and space miners.  Tiny, small, medium, large and huge hulls are the combat platforms and have more than one hitpoint.  You start the game with tiny hulls.  You must research "interstellar construction" or its equivalent to get small hulls.  You must research Advanced Hulls and then Medium Hulls to build medium ships.  You must then research Superior Hulls and then large hulls for large hulled ships.  Finally, you must research Master Hull Building and then huge hulls to build huge hulled ships. 

My usual use for cargo hulls is explorers (lots of engines, lots of sensors) which can provide an edge early on - later I discard the engines and change them to semi-stationary monitoring posts. For ZYWs, cargo hulls are also invaluable, as they are cheap to build and can be upgraded to spore ships once they reach their intended target.

If you find yourself being bullied, slap a ton of weapons on a cargo hull and let it stay in orbit - you'll get a boost to your military score which will affect diplomatic relations favourably. As long as you don't intend to really fight with them.

OTOH, cargo hulls for constructors are a waste of space - a small hull is sufficient and often cheaper and quicker to build.

But never, ever, fight a war with cargo hulls. It's throwing free experience points / upgrades at enemy ships. Of course, at the start of the game... cargo hull, lots of engines, ATT 1 - against weaponless constructors, bases, scouts, colony ships... can be worth it. Just don't expect that strategy to last longer than the first 15 - 20 turns.

Would the cargo hull strategy still work well with the Arcean Super ability? As long as you get the initiative in every fight.

Still, in all cases the cargo hull idea can be as good as using small ships. The 12 HP you get with a small ship is practically identical to the 1 HP for a cargo hull once you opponents attack values get into the 20's. Let alone the 8 HP for a tiny. Those extra HP will help with your military rating but not give you too much in the way of surviving a real battle.  That said, i personally still don't use cargo hulls for anything military except for transports.

You actually get 8 hp for a small and 5 hp for a tiny-I assume you're speaking from memory with both Xinathium Hull Plating and most if not all techs that provide an hp boost applied...in which case smalls and tinies are of course no longer worthwhile.

A better example might be ; an empty cargo ship {exxon-valdez} mounting 4  5inch rapid fire auto guns and 4 heavy machine guns vs an old ww2 pt boat {McCales Navy} who would win?Theres a lot of space to be used on a cargo, but theres also a lot of dead space giving no support to the hull.

Cargo hulls are normally intended to be for the utility class ships - they're for the ships that don't fight. However, as the others have mentioned, they can be incredibly useful at the beginning of the game because they can hold a lot of stuff before you've researched the larger attack hulls.

After reading this, I'm beginning to suspect that the AI is running my state government.

In my current game one of my cargo-hulled survey ships got an extra 12 hp from anomalies, plus experience upgrades.  I upgraded it to a combat ship and a few skirmishes later it's up to 26 hp -- with vast room for components it's a fleet unto itself against the AI's small hulls.  Watching it plow through the defenders on its way to an AI homeworld reminds me of bugs splattering against a car windshield