Yeah, that spell is pretty nasty. I don't think it'll hurt you as much as it hurts them, though. You can always patrol, lower taxes, and recover the population. They'll have a hard time doing all three because they need the income and growing the population back is tough. Patrolling with indies is an option for them.
Upon further thought stealth armies would hurt them too. Let them blow cash on PD, or better yet march large armies around and patrol trying to find you, killing their pop the whole time.
I don't know, I haven't really tried any of this. I played against them twice in SP. They were close neighbors both times so I eliminated them early through regular means. Just some ideas I'm shooting around.
I have only played them in EA but i think only the biggest giants eat the population in EA. I thought i read something about them not eating each other and everything else in one of the later ages but not really sure?
In EA the rephaim all eat population and can also eat avvim and each other. My Baal ate a Melqart the other day. I think he may have gained power by doing so actually.