Pirate changes made via the 5 entity files controlling pirate research in the listed categories.  Changes listed are the per level increases the pirates gain in each category.  Note that weapon damage and range are both in a single file.

Note that for all these files the base cost was increased from 500 to 600 credits to smooth out the progression a little

setting             original value                 new value

armor                  2.0                               1.3

HP                      0.2                                0.15

regen                  0.45                              0.2

weapon damage   0.2                                0.08

weapon range       0.5                               0.025

w. cooldown          0.07                              0.04

Results: The pirate late game strength is roughly half what it was numerically, but this is quite decieving.  They are not half as strong with these numbers, and in vanilla diplomacy they are essentially mini starbases in a frigate disguise.  The AI is totally unable to deal with them and they can lay waste to a fully developed system with full starbase and even with a protecting fleet.  We will call that the "absurd" setting.

Testing results of the above settings (I tested lower but the pirates were quite weak even in late game, so tweak around these values carefully if you intend to self mod these 5 files):

Pirates are now a challenge in the early and mid game but a real threat by late game to any system that isn't fully developed.  In the middle game they are strong enough to lay waste to an entire system protected with full defenses and a mid-upgrade starbase (but no mines).  I say they CAN - this result is not normal however, usually they wipe half your planetary defenses, most or all of your logistical structures, and hurt the planet badly.

In the late game these pirates are quite strong, able to take down a well defended system entiretly - HOWEVER, a fully developed system with full starbase and mines will defeat them easily (though you will lose a few structures, justifying credits spent by your enemies).  This is the logical and appropriate result.

An attack on the pirate base by 820 fleet supply and 8 good caps will wipe the base, as it should with such a major fleet committment.

At any level the pirate damage can be heavily mitigated by dropping a small fleet and several caps in orbit to help with defenses.  Caught on their own, a small fleet in open space in mid game will be destroyed.

So yes, the pirates on these settings are DANGEROUS, you MUST pay attention to what they are doing, and you get your money's worth by making them harrass or annihilate someone else.  (especially over aggressive AI's that don't drop in starbase defenses)

There was an issue with trying to create a mod with these files - they were not recognized though the mod supposedly loaded for diplomacy.  I had to replace actual files in the gameinfo subdir of diplomacy for the changes to take effect.