Are you talking about a game in the campaign, since you mention the dreadlords rushing to grab other planets? If so, which campagin, what is its title?

"Cakewalk" dumbs down the AI so it should be easier than "easy" unless some other factor (galaxy layout and starting position, race of the opponents, ...) makes a difference between both games you played.

yeah well this mission is a little counter intuitive in terms of AI

the thing is : the dread lords are supposed to be immensely powerful which is why they are so "good" (heavy starting bonuses only in fact)

and the difficulty level defines all AIs including your allies...

so what you probably should do is actually increase the difficulty so that your allies are better able to defend themselves...

This is why people (should) play sandbox first.

The campaign in GC2 is not a tutorial; it's more like a history lesson.

well going from cakewalk to suicidal is pushing it a little too far too fast I think!

I would personnaly try from normal to painful/crippling, paying special attention to "tough" https://www.galciv.wikia.com/wiki/Difficulty_level

good luck

Well, as whismerhill explained, this is because on suicidal you suddenly have very competent allies which makes a huge difference
In sandbox mode increasing the difficulty will make the game harder for you, don't worry about that.

And that particular scenario is a strange one, in other scenarios harder difficulties will work as expected.