Yeah, there were a lot of things with SR2 that kept it from being a particularly good game, economy being one(I also have a hate-on for the diplomacy card game). I did manage to finish a 1v1 game the other week, and in the several attempts leading up to that learned a bit about the economy system. Basically, most resources besides water and most food give different types of "pressure" to the world receiving it. If the world has pressure capacity(mainly determined by population), then it will attempt to automatically build structures that use their related pressure - for example if there's unused commerce pressure, the world will try to build Markets which increase money income. Annoyingly, you cannot choose where these are built, though if you build over them they're probably rebuilt. They're also upkeep-free as far as I know.
This means that while getting a world to T5 is good for that sweet, sweet income, you should also plan what pressures to specialize(or generalize) in, such as world intended for constructing things get as much labor pressure as possible. Of course, this is nearly impossible on a modest-sized galaxy, since it takes as many as 50 worlds to bring one world to T5, not counting megafarms/water production buildings, but counting the T5 in that 50(as it can supply its own requirements). One strategy is to push hard for the center, where the higher-tier resources are.
As for why you lost the battle, that's a good question. The strength level is supposed to give you a pretty good estimate, but I guess not. Were you using your own designs or the stock ones(which are decent enough)? Also note that 4 fleets is probably better than 1 fleet, since that's 4 flagships. Also, your strength indicator could be based on just your flagship, meaning the support ships were weak.
I will add that if you're being blocked in the beginning like you were, or if your trade networks are separated, you can build a Commerce Station in both halves of your severed trade network to resume trade.