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Alliance copters initiate 'rofl'.
no my glorious empire is melting away like ice cream
nOoOoO
A federation fleet (its also the same for the Galactic Defense Force or Imperial Navy fleets) has no functional Command Limit (how many ships can be in a single fleet).
So they can put as many ships as they have Federation Naval Capacity in said fleet and any newly constructed federation ships indeed auto join the fleet.
Each member of a federation (assuming that has the Fleet Contribution law set to anything other then none) contribute a bit of their Naval Capacity for the Federation Naval Capacity, but it has a maximum value of 600.
The total was about 600, so this is the most likely reason. I know some people were telling me to turn down the difficulty but this was on the second lowest, so no bonuses either way. Thanks for the explanation. I was getting frustrated because I've turned down the difficulty twice and it just didn't seem to have any effect, and I just wanted to play the damn game without getting overrun 100 years in.