This is not a threat regarding their balance (though they are either too strong or the faction AI is not strong enough) but it seems to me like the pirates should not take over planets. I feel it would be more in keeping with their character if when they blockaded a planet they would add a "pillaged" malus to it that decreased your FIDS, it could last for an x amount of turns after the blockade is cleared as if the planet needs to rebuild its infrastructure. As it stands now pirates are essentially a ninth faction. I have seen games in which they have beat the AI and had their own empire.

Being their essentially their own empire, wouldn't it make sense to allow diplomacy with them too?

I have heard that suggestion too. The ability to bribe them away would also be helpful as well as fleshing out the immersion a bit more.

Play the pirates...steal faction ships...imagine a fleet with 4 different faction ships in it? Now that's pirating .......arrrrrgh. Get me a a sower parrot!!! Why not give the pirates the ability to take ships if they win a battle? I mean it would suck the next turn to have to face your own dreadnought...but it would also be very contextually accurate.

I would agree that they either need to have their planet capping power disabled, or they need to be greatly fleshed out and expanded. If expanded upon then I think their capping ability should be disabled until such an update is finished.