I'm sure my Cultures & Demeanors Mod is still floating around the nether regions of this forum somewhere, I actually made a couple of cultures (Pacifist and Transcendi) with totally crap combat that would have to rely on careful diplomacy to get ahead.
Look at it this way: You have lots of stuff to blow the cr*p out of each other with, but playing a peaceful race that needs to rely on diplomacy, intelligence, and downright cleverness rather than brute force would be a nice change of pace, no?
Especially in PBW or other kinds of multiplayer games, choosing to play such a race would present you with a whole array of new challenges but also a vast amount of opportunities. You can choose to out-colonise your enemies, expanding fast enough to deny your enemy valuable resources, or forge a stable, long-standing alliance, using your larger production and research yields to pay your partner in return for military protection. Or you could set up a trade empire, centered around a few walled-in systems protected by obscene amounts of minefields, building highly advanced ships and producing resources at a much faster rate than any other race in the galaxy and selling those ships at a healthy profit.
You might not be able to crush all other races under your mighty heel, but it would be fun, wouldn't it? (IMO) (Alternatively, if you play with different victory requirements, going Pacifist would give you a potentially immense advantage but with great risks - you will expand very rapidly and might accrue points an order of magnitude faster than other races, but if a warlike, aggressive race comes along with fleets full of troop transports it's bye-bye.)
And of course it makes the game more like a space opera, where every race isn't at each other's throat or there aren't just a few major alliances of equal members vying for dominance.