[Q]

This is a frequent problem with the AI's Blue Lord. They declare war without beeing prepared for it. And unfurtunately I think this will be quite hard to improve. I don't think the proposition of ColdSteel would make here any difference, other than that the small empire would seek military alliance treaties with the all the other empires. What would a human player do? Mine the colonies and warp points like mad, build as much fighters, satellites and weapon platforms as possible, wait till only few enemy ships are in your home system, check if you will still have enough resources without the trade, position your own attack fleet on any enemy colony in your sytem and then cancel the treaty or declare war. Not so easy to program I think.
As for the treaties the smaller empires should make with each other: It might be unrealistic that they form partnerships but it would be the best option, because a military alliance would give them no help against intelligence operations.