You'll have to elaborate on this one. How does it abuse the system?
Well, I'm primarily going by what was written in the OP here, as well as things other posters have said.
For example, other empires having peace treaties within the first minute of the game, while you're expected to complete nigh-impossible missions (again, we're looking at the very beginning of the game) to get on their good sides. Missions which, if you don't complete them (and you won't at first), will further harm your standing with other empires.
Essentially, the AI players don't have to do any missions for each other. They can decide to sign whatever treaties they like with each other as it suits them. That's the cheat, because the player is expected to do missions, an additional burden apparently not levied on AI players in any way.
Because of this, you may get triple AI cap ships attacking you very shortly after the beginning of the game, as well as high pirate bounties placed on your empire that are difficult to beat. Again, this all stems from the fact that AIs are not fettered by any mission system and can treaty with each other as they see fit (apparently).
And then, of course, there's end-game spam, which is actually to expected if you never bother with diplomacy and may not really be an actual "flaw".
Now for ME, it's not so much the added challenge of this phenomenon, but rather the fact that a somewhat annoying diplomacy system which favors the AI for no really good reason breaks "the fourth wall". Knowing that the system is flawed makes it sort of an eyesore in my game.
So is it ever worth bothering with diplomacy, which (people seem to agree) is a deck that's stacked against you, rather than always locking teams? Aside from added challenge because it's stacked?