More fluid factions, as HFY laid out would be a good start.
Internal affairs DLC should come with an espionage/diplomacy/factions Custodian update. There is a lot of potential to expand and connect these systems in a way that doesn't REQUIRE either the Nemesis DLC or an Internal Affairs DLC to function, though internal affairs would likely use the same Espionage systems as Nemesis. I also think the return of some sector based policies such as species rights and living standards would really bring a lot of depth to the game, and opportunities for a DLC to expand upon.
Factions should care more about the Galactic Community, what resolutions you vote for/against, what is passed, who is on the Council/is Custodian/Emperor. Certain factions that are within your governing ethics should be happy whenever you pass ANY resolution, even if they also do not necessarily LIKE the resolution. Authoritarians, Xenophobes, and Militarist should be more pleased by flexing your authority, regardless of the resolution. As an example, a Militarist leaning faction within a Megacorp with the PMC civic would be very displeased by you calling for and successfully repealing Security Contractors (due to PMC civic, regular Militarist faction may or may not like this), but would be somewhat offset by you flexing that you can, and would be less displeased if you only voted to repeal it and didn't call for the resolution yourself. Had you instead proposed and passed this resolution, they would be very happy, whereas the Pacifists or more centralized Militarist among you may not be happy. The Xenophobe faction may not like that you partake in the Galactic Community in general, but would LOVE to be constitutionally immune, like to repeal resolutions rival empires passed, and in general vote NO on as many beneficial things as possible.
Certain factions should care about certain espionage actions, and there should be more. Materialists should be happy about stealing tech for example, spiritualists could get an action to sabotage robot pops, increasing their upkeep, authoritarians and egalitarians could like promoting rebels in opposing ethic empires, xenophiles/phobes would like actions based on helping xenos rise up against their overlords, and terrorizing xenos in other empires, while pacifists could start up protests, and militarists being pleased by blowing up star bases, causing damage, and being caught doing it. There should be espionage actions that are very powerful but cannot be covered up, and immediately start wars. For example, a Fanatic militarist covertly for years building a cell in a rival empire, culminating in an attack on their parliament, killing many leaders and causing massive penalties for the opposing empire, bonuses for the empire that succeeded, and immediately beginning a war. Extremely powerful/diplomatically dangerous actions such as these should only be available without EXTREME penalties in certain circumstances, such as against an empire that has committed an atrocity against citizen species of your empire, against opposing ascension paths (synth vs psi), an empire using total wars against like minded empires, or against an empire that has used these actions themselves. An action such as this would be a cool and thematic way for the rebellion against the emperor to be started, with a thunderous applause from the plasma rifle rounds clattering on the floor, as the leader of the Rebellion reveals themselves, drawing their laspistol and putting a steaming hole in the Emperors back as chaos breaks loose in the Senate!
Ascension paths could also each give unique actions. Examples, a synth ascended empire replacing pops in a target empire to be activated and help during a future invasion, psionic infiltrators causing a localized planetary crimewave, genetic scientists developing a food-borne disease that only can survive on a certain planet and targets a certain species, or even sub-species with great finesse. These could backfire, causing diplomatic penalties with the target empire, their allies, and the galaxy at large, and maybe problems at home, if your people happen to care, or if the experiment finds its way back home somehow.
Sector factions should come back, taking their demands from the ethics of the population of that sector, and the ethics of neighboring sectors. Weighted issues for certain situations/demands/requests based on those ethics, governor traits, local leader traits such as a stationed admiral or assisting researcher, and neighboring sectors/empire wide demands and demographics. A sector nestled safe near the core, filled with research worlds and materialist and authoritarian pops routinely experimenting on pre-sapients, should not be too concerned about the war that's being won on the other side of the empire or the indiscriminate bombardment of xenos, even if some of them happen to be pacifist. Conversely, the sector, still on the other side of the empire, yet bordering xeno neighbors* would be very concerned about new border wars, and the treatment of refugees/xenos and their own safety, even if they happen not to be particularly pacifistic/phobic/phillic.
Your Authority should determine more about foreign relations than a flat opinion modifier. Rulers/envoys should have personality traits that can clash/mesh with each others foreign counterparts, determining the speed of trust gain, opinion shifts after succession, and what type of events and options for political events can fire. The ruler/envoy "personality" should be entirely separate from ruler traits that we have now so there is no cross-balancing to be done. These personality traits could be weighted and determined by Ruler pop ethic demographics and species traits.
*There should be more distinction in diplomacy whether an empire is Xeno or not, the relevance of which would be based on Authority and the ethics of ruler pops. An empire with 6 Blorg rulers and 2 Human rulers would be considered a Blorg empire, and would be treated by another Blorg empire as if they were the same species, increasing (or decreasing) trust growth based on like policies. A Fanatic Purifier Blorg empire for example may demand that a Xenophilic Blorg empire discontinue allowing aliens full citizenship, turn over their refugee pops, xeno leaders, or more. The Commonwealth of Man could attempt to force a xenophobic dictatorship or oligarchy upon the Humans of Sol, diplomatically or with their fleets, or the reverse, the UNE bringing the authoritarian Commonwealth to heel and uplifting the downtrodden.
The xeno-friendliness (can't think of a better word) of an empire would affect Factions and diplomacy, and would be based on a % weighted by authority/ethic/species rights. For example if (extremely loose numbers/mechanical idea) 35% of ruler pops are Human, and the next nearest ruler pop number is 5% with Full Citizenship, a Fanatic Authoritarian/Militarist dictatorship would be considered xeno-friendly by their own population, and other empires with similar ethics/authority. With those same demographics, but with the xenos having Residency, and Ethics of the empire being Xenophobic, not Militarist, this would be considered a Human dictatorship, as Xenophobia would weight the value of Human ruler pops much higher, and Xenos with residence would be weighted lower based on their species right. A Fanatic Xenophobic empire could see an empire where 15% of the Ruler pops are of their species as having disenfranchised their people, and would gain diplomatic actions and casus belli based on this. Conversely, a Fanatic Xenophile democracy could see a self-proclaimed "xeno-friendly" Authoritarian dictatorship as a serious threat, despite the dictatorships own beliefs on what constitutes "fairness", and some of the pops in their empire could feel the same way, being more welcoming to a potential conquest by that democracy.
Certain governmental policies should be "available" (able to be forced upon/sought out) to the "wrong" ethics through faction demands/war goals/situations, and they should generally cause serious problems for the empire in question, unless they are willing to spend resources to reform their government to the new demands or go through with some way of reversing them. If the Blorg Purifiers force the Happy Blorgin Time Nation to give them to institute xeno slavery and give a xeno livestock tribute every year from a bordering sector, and restrict migration from the new thrall worlds, the Blorgin Time folks should be able to embrace this new change, and see what those xenoburgers taste like, or fight back against it from within, and attempt to smuggle pops away from those backwaters to a core sector (perhaps with those shiny new cloaking fields). Another example, if the Pompous Panasi Priests were forced by the Blorgin Time to open their borders and allow migrants and their droid servants to a certain few worlds with full citizenship, those pilgrims may find themselves missing scheduled food shipments, or critical maintenance parts for their droid servants, all as an orchestrated attempt by the Panasi to get them to go back to where they belong, and repeal the forced policies.
Gestalts would have a similar yet different system to other empires as they lack ethics. The consciousness could be drawn to different "goals" rather than factions and would be rewarded for following a goal with single mindedness, forgoing focusing on other parts of governance. A hive obsessed with control over galactic affairs would be rewarded for using influence in the galactic community or pursue diplomatic actions, whereas one focused on developing their core would be rewarded for providing high stability and creating hive worlds/machine worlds, or completing situations/events. I tend to have a overflow of influence as a gestalt or a sufficiently advanced empire, and more ways of spending it through situations would be useful.
