"Turtling" as I see it relies heavily on the opponents being distracted. While they spend their time eXpanding and eXterminating others, you can spend your time eXploiting. I'll give an example scenario:
You colonize a couple of places and put decent defenses there. Then you start on infrastructure, build upgrades, research stuff, every once in a while update your defenses. By not spending your time and other resources building armies, you can upgrade and research more (this is where flexible taxation comes in for most games - the more you tax, the more armies you can support but the lower is morale, slower is production/research). AoW1 and 2 and SM used research-mana taxation, which worked pretty well for magic-based factions. For a Dreadnaught, you don't really care about mana that much (low running mana costs), which is probably why it got dumped.
Other players colonize actively and start wars against other aggressive expanders. This means building armies, trying to beat the other with quantity (since T1/T2 are not that different in strength) and tactics. This means that places they'd like to build upgrades in have to spend their time building armies. Active warfare slows their development, but whoever comes out on top will have a massive leg up in territory and population. That means that once the wars are over, the development will probably be very fast, rapidly catching up to the turtler.
There are multiple key factors in this:
If the turtler cannot keep their defending forces updated enough (ie research is not ahead of the aggressive players or aggressive players find the resources to launch a large-scale attack against a non-aggressive player), the turtler is turtle stew. It relies on other deciding that attacking the turtler is a commitment of resources not presently acceptable, probably due to other, more imminent threats.
The turtler, if played well, will have a small window of opportunity - while they are ahead in development (towns and research) but the other players are still distracted with each other. This window is often used for Technological victory (say... destroying an Antaran Star Fortress), which keeps the combat to a minimum (unless someone tries to stop him), but can also be used for a Conquest victory (quantity vs quality - being the first to hovercrafts in SMAC/SMAX is a massive advantage as it allows for Blitzkrieg).
If the tech tree is too small or does not give strong enough advantages, turtling is DOA.
If the war commitment does not cause any slowdown in other development (say.... research), turtling is DOA. Kind of AoW3 case here.
It is not just about "wait here while they come to me", it is about keeping your home safe while getting ready to do battle on your terms with the advantage being on your side. As Sun Tzu wrote, "Standing on the defensive indicates insufficient strength; attacking, a superabundance of strength.". Remember, strength in 4X games is not just number of units, technology is a big modifier.
Feel free to comment and correct me if I've got something wrong.