I need advice....

[Phoenix-D]

"1. Is it just a coincidence (sp?) that my people got so upset after the defeat or is it because of that battle?"

Not coincidence. Loosing battles makes your people unhappy, gennerally. Stalemates are worse, and battles closer are worse than battles farther away.

"2. What could I do to get the confidence of my people back up after such a dramatic loss and such heavy losses of ships and men."

Built troops, build Urban Pacification Centers, build more ships. Make a good treaty (with anyone).

"3. How could I still defend my space properly with only 1/3 of my navy left, and how would you recommend rebuilding my fleet? For example what kinds of ships should I replace first and what should I do to protect my space in the meantime?"

Mines at sats can make cheap fall back positions, but you really need to position them ahead of time. I'd just emergency build the biggest warships and hope, moving anything I had to the most likely route of attack (note: always try to defend on your side of a warp point. you can start at close range with the first shot, which can be devastating)

"4. Since the bulk of their warfleet was crippled or destroyed was it really a defeat or more of a draw?"

Depends..can they still attack you?

"5. Would the computer follow through with the attack even with that damage in the full Version or would it do what the one in the demo do and fall back for a while to rebuild?"

Also depends. The enemy AI is..erratic.