The current game I am playing, I have got pirates nailed just right.
***** Early game *****
Outbid your opponants only if they start puting bounties on your head. Don't feed the pirates unless you really have to.
Pay special attention to the map (you have auto explored nearly all of it by now right?). If you have to bid on pirates, send them towards someone where the pirates wont have to go through your space to get to them. Idealy, pick a rival you want to slow down but wont get the pirates using your space (otherwise your AI auto engages them if you aren't careful and they take pot shots at you on the way through).
Pay special attention to covering your structures with platforms. I covered a planet with 4 gause platforms only for the pirates to fly around the back and start beating up on the undefended civilian structures.
***** Mid game *****
Your economy should be competitive now and your forces growing well. It depends on your priorities but if you aren't in the middle of a war with someone, why not let the pirates come to you? I had 3 capital ships waiting for the pirate fleet which meant they got some nice experience before going up against the rest of the galaxy.
Intelligence is the key! If you know someone is bigger than you, a nice fat pirate raid while your main fleet attacks the other side of their empire works wonders.
***** Late game *****
Not sure I've even got their yet, I am such a newbie to the game. Let's just say my current fleet is considering making a raid on a pirate planet as I hear there are some nice bonuses if you win.
My first few games I thought pirates where a silly big distraction put into the game without much thought. After a few games and getting used to things now I can see the benefit. The ability to change the timer might be nice but I haven't seen even 5% of what the game has to offer yet so hold off any changes please so I dont get lazy and start saying 3 hourly pirate raids lol