I had something interesting happen recently: while I was building up my military and divvying up my over abundance of planets by sectors in the mid game, I became the 2nd most powerful military nation; just short of another giant blob nation across the galaxy. We are quite neutral with each other considering all our fractured neighbors who were constantly fighting and consolidating only to break apart again were separating our borders.
In this state of somewhat calm status quo, a giant alien horde spawned on the border of my neutral rivals empire, quickly making them the 2nd most powerful military. They expended all their current ships to hold the horde and are currently in a constant skirmish with the invaders while the rest of the galaxy does its normal fight each other thing and I sit and research the awesome late game capital weapons (currently the Arc thingy and the Kinetic Battery).
So with this going on, some of the neutral border counties see whats going on with the horde of alien invaders and actually ask to become my vassals. I didn't think that could happen, but then again, every other nation other then my rival is considered "Inferior" or "Pathetic" in terms of military power now. And my rival was "Equivalent" in everything except technology until this happened, and now their fleet strength went from equal down to inferior.
So while I consider the diplomacy options as rather barebones, the AI behind it seems okay; to actually consider their own power to their neighbors and galactic threats and makes decisions accordingly shows some promise with future DLC and modding.