When playing single player my favorite settings are:
- Small Galaxy, Spiral, 2 Arms
- 0.25x Habitability, no guaranteed planets
- MAX Fallen Empires, MAX Marauders, Caravaneers on, MAX AI Empires
- XenoCompatibility off
- Random empire placement
- Hyperlanes at 1.5X
- Wormholes and Gateways at 2x
- No Advanced starts
Summary: The driving factors behind my choices is that I don't like the JOB+POP management loop and think it's just too much micro -- so I go for smaller, less populous galaxies. To make up for that I make my galaxies more crowded and more connected. The side effects are performance is generally fine even to late game && tech progression doesn't feel completely broken to me -- at least compared to larger, more populated galaxies.
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The driving factor behind the Small Galaxy and limited Habitability is simply that I dislike a lot of the JOB+POP management loop. As such minimizing the planets in the galaxy is the best way I can keep the level of "micro" to a manageable level for myself. While not as big of a problem as it used to be the smaller galaxy also helps keep performance decent until later in the game.
I like Spiral Galaxies for that extra chance that natural terrain & random empire placement will shake up your game ... at least compared to elliptical or similar galaxy shapes.
MAX Fallen Empires allows for two fallen empires to spawn so there's a chance for a War In Heaven. Smaller galaxies wouldn't allow for that OR smaller number of Fallen Empires.
Max Marauders [two in this case] means I don't know why band of Maruders will spawn the Khan so it keeps me on my toes a little more.
I like the randomness of Caravaneers -- it breaks up the monotony.
Max AI Empires -- this acts as both a limit to the number of systems [and planets] I can expand to peacefully while also offsets some of the feeling that the galaxy is "too small" by having lots of potential neighbors.
Xeno Compatibility off: It keeps the species list a little cleaner esp. if I'm managing ascension on a non-Robo-path.
Random empire placement [as opposed to "clustered"] ... Seeing as the galaxy is smallish and crowded anyway this just lowers the chance that I'll have 3 empires "right on top of me" on day 1. Gives a little more room to expand to.
Hyperlanes at 1.5x : The extra connectivity still gives you a few choke points that you can build around and gives you a better chance of moving around early "space monsters" or similar. Plus with the slow movement speed it may give you quicker pathing if you need to go from one side of your starter empire to the other in limited time.
Wormholes & Gateways at 2x : These items keep me on my toes [Wormholes] and give me something to think about. With limited territory size I bump up how often they occur so improve odds I naturally have one in my territory.
No Advanced Starts: Given that the galaxy is so crowded having an aggressive Advanced Start AI as a neighbor isn't necessarily fun. Even with Advanced Neighbors "off" one can start pretty close to you and can wreck gameplay if unlucky -- better for everyone to start at about the same footing other than Marauders & Fallens.