[Illuminated One]

Some thoughts:

1st) I agree on the scales mostly.
However take Magic 3 - this has a good synergy with Luck for Magic Gem/Item events (and I think the 3000 gold + item event).
Additionaly with your income going to below zero sooner or later this will help keeping your research up. And, what's more all the nasty things that you can unleash on someone rushing you is mr negates, while m3 decreases mr.

2nd) Your crappy scales afford you a "rainbow SC" (especially if you take dom 10). I'd say take air and earth (since you'll have a hard time into that), the rest is up to you.
I'd definitely take something combat oriented, as your armies are even worse than the worst crap sane minds can imagine. The main problem is that they can't damage anything. Someone to use the offensive earth buffs might be worth it, although with some gems some of the illithids can do it, and for most of the time it's to dangerous to have your god hang around only protected by dreamers.

3rd) Your illithids can be thugged out to some extend and can all teleport. Your S2 illithid priests can even be blessed and teleport with a starshine cap.
Neat trick - get to the artifacts before anyone and forge the pocket lich and the pocket knight. Give it to an illithid scripted to (returning).
Teleport him into a province, the illithid will return taking the items with him, but the pocket creatures will stick around and fight the defenders.

4th) Make use of your national spells.
The illithid spectre is stealthy, flying and turns people insane.
Dreams of R'lyeh is about the coolest assassination spell ever.
Especially when someone attacks you uw - his troops will just drown.