Interesting find. Good fix. It's been a while since I played, I had to go look up Deep Space Citadels.
The awkward half-abstracted half-simulated battle system has long been one of Stellaris' original sins, dating all the way back to launch. I feel like the devs long ago gave up on improving it; I don't think much has really changed since disengagement was added. So much of the battle system is good-enough kludges to fix fatal flaws. It's workable, certainly, but does keep causing problems. However, that's not to say it needs to be ripped out. You could change a *LOT* in the battle system design-wise without changing the technical side of things very much.
Long ago I tried to rebalance the whole system via modding, but my whole design got broken overnight by a backend change that hardcapped evasion.
IMO, the biggest thing the current system is lacking is nonlinearity. The gritty details of ship design will change how things match up, but you're ultimately just applying multipliers to fleet power. Fighting a Leviathan is just a matter of eyeballing whether its armor or shields and bringing enough ships, there's no like hard technological requirement or game changing technology that gets you in the fight.
An example of nonlinear balance would be damage reduction armor that requires big guns to pierce, or weapons that scale up and hit every ship so you can't win by flooding in with numbers. I'd love it if combat strategy was a mix of fleet mass and 'chess pieces' and the leviathans were like extremist outliers. As is I barely see them. On a lesser scale you also have problems with like mining drones basically being nonentities because of how rapidly they get 'outdated' in fleet power, but thats a tougher problem to handle
edit: The unfortunate downside is that people would get mad if their 100k fleet got uselessly chumped because they didnt understand the mechanic. A system where you can make big differences at the edges but ultimately you can solve all your problems by throwing numbers at it has broader appeal in this manner, since you can play it successfully with less knowledge.