The diplomacy is flawed getting the happiness, but once its pass 80%, then it works well with having a decent ally and also other factions forming alliances against the two bigger factions.

Kye.

One thing that maybe happening is, once you have 35%, you have a bit of allegiance, but you can only commence a cease-fire at about 50%.

If you are in combat with said foe, and you are attacking his ships, allegiance will drop to 0%.

I have had the diplomacy window open and seen it drop from 35 to 0 realtime.

At the moment i'm playing a random huge map. And with a foe about 2 stars away from me, but with 2 completed missions, i get 60% allegiance, more than enough for a definite agreement on a cease-fire. Once you get higher, could be you need 95% , maybe he'll commit to peace-treaty, and you could even try planet view and ship view.
I have a game running for about 13 and half hours, and have had 2 full allies for about 4 to 5 hours each.

Trying to push forward while managing 2 star systems you already captured, now that's a bitch

You may be right about shooting at his ships. They have ships all over the place though so it is nearly impossible for me to avoid shooting at them. Like they have explorer ships all through my territory that I am always shooting at. It is flawed it shouldn't automatically drop to 0% or maybe once you pass 1 mission it should default to a neutral status where you won't automatically shoot at each other.

I will try offering a cease fire right away if I can.. it is going to be very difficult if not impossible if I have to wait till 50% since one of the stupid explorer ships will pass through my territory.

The muliple attacks seem crazy too. I could have a bunch of different AI player fleets attack the same territory at the same time and they NEVER shoot at each other. Sometimes they all get there and they seem to be like "holy crap this is nutts I am getting otta here" then they jump away but other times they all keep on attacking just me not each other.

The AI really should start shooting at each other when they get to the same planet if they are not on the same team. Think about it if you jumped your fleet into a zone with two different AI player fleets your fleet would automatically start attacking both of them.

Great game but these two problems are making this map nearly impossible for me to beat. I could see if a map was impossible to beat because the AI was too good but this is just because this aspect of the game is really buggy.