There are many, many threads discussing this scenario, as well as a few of the other more difficult campaign missions. Unfortunately I haven't actually played the campaigns much, so I can't provide information on how to beat this mission, and the forum search feature is pretty awful... so you might just have to look for those threads randomly. Some general anti-Dread Lord advice from my experience fighting them in sandbox mode:

If you focus on intercepting their transports, the DLs won't have that many planets, and whatever the uber-levels of weaponry they have, their defenders are still low-hp small hulls. Fighting the DL ships is a waste of time and resources; the most important techs to have against them are sensors and engines so you can (hopefully) avoid combat. Also, their obession with killing starbases

can be exploited to decoy them away from more important targets. In my experience, if given a choice between killing a fleet or a starbase, the DLs will always go after the starbase,

Incidentally, what game are you playing this on? The Dread Lords campaign is significantly harder in the expansions, thanks to the new combat system and other changed features. It's best played on the original Dread Lords.

I recently beat this senario (using TA), and once i conqured all the DL worlds the game just kept going on. I looked in the victory conditions screen and it said 100% and there was a save for the endgame of Armagedon, but it wouldnt let me move on. I even crushed the remaining non allied civs and got a Tech Victory, still no victory screen, no moving on to the next senario. HELP!!!

Thanks, ill fix that post-haste! Must Kill Dread Lords!! YAY!!

In my experience, the DLs are a one-dimensional foe that does indeed force you into a turtle strategy, where you drive for the high-level weapons techs.  In the original GC2, the combat mechanics only allowed them to kill one target per turn, which meant that you could easily fight them with a swarm of tiny ships.  You still can, but now you need a lot more ships (at least one more than the DL ship has guns).

Other than that, the main ways I've found of fighting the DLs involve gaming the AI:

 - They instantly detect and go to destroy starbases (My bug #2), so don't build them except as a distraction.

 - They also seem to detect planets that have a ship garrisoned there (My bug #32), so garrison your ships just adjacent to your planets instead of at them.

If you avoid these two things, the DLs will tend to focus on other races more than you, which gives you time to turtle. 

Also:

 - The DL's combat ships are nearly always speed 6, and their transports are speed 10.

 - The DLs rarely escort their transports properly.

Because of these, if you get good sensor ranges (Eyes of the Universe, ideally), and good engines, you can station a screen of fast ships to pick off the DL transports.

The AI also cannot deal well when fighting opponents with faster ships (My bug #33).  As long as your ships are at least two points faster than the DL ships, you can avoid them forever.  This isn't very fun, though, as it means you're micromanaging the movement of all your ships every turn so as to keep them out of the DL's range.

I usually create a small, fast ship called the "Gadfly", and send it circling the DL's home system.  Because the AI doesn't understand how to do an area denial or zone defense, you can herd its ships into a single swarm all following the gadfly.  The last time I played, the DLs had a couple hundred ships, and just about every one was merged into this huge stack of ships uselessly following my Gadfly, which I kept just out of their range every turn.

Needless to say, gaming the AI this way is rather unsatisfying, especially since the exploitative strategies tend to be micromanagement-heavy.  I'd rather see the DLs be a bit more well-rounded, instead of just having an obscene level of weapons tech.  The Antarans in MOO2 were a lot more interesting; they were tough, but not unbeatable in combat, they had their own unique techs (which made the very difficult act of boarding and seizing their ships worth the trouble), and there was more than one way of fighting them.

I've said this before, but it should be remarked that the Dread Lords campaign was designed to be played on the original Dread Lords.

I haven't played the later campaigns that much, but AFAIK none of them pit you against massive DL numbers the way "Apocalypse" and "Achilles Heel" do. The old combat system made those missions a lot easier (but still very very hard!). In fact, the way the new combat system made fighting the DLs much harder (especially when combined with TOA tech inflation) is one of my biggest gripes against it.

In other words, playing the Dread Lords campaign with settings it wasn't designed for - i.e. the expansion combat rules - will break the difficulty and require exploitative strategies. Playing the campaign on the original game still typically required turtling and "bait" tactics, but it was a much more fair experience. Criticizing the campaign because it was made unsatisfying by new settings seems to be missing the point somewhat.

It would be, except that the documentation for GC2 2.0 indicated that the old campaigns have been updated for TA.  It therefore seems to me to be perfectly valid to complain about ways in which that update is incomplete or buggy. For example:

 - The DL campaigns need to have the planetary habitability and asteroid mining techs blocked.

 - Some of the AIs don't appear to be able to cope with the available techs in the DL and DA campaigns.

 - The Dread Lord planets need to be scaled down, to adjust for the combat system changes.