The origin of this thread was the hassle pop caps create particularly in multi-play when someone drops. Apocalypse, who I seem to agree with on most things, beat me to the punch....have a team pop cap, divided equally if you like. If a player goes then the other can continue on. Hell, why not revert control of any existing units to the continuing player.
Pop caps, for battles, while completely unrealistic are necessary for issues of lag if anything else. They also maintain the illusion of some fairness....nevermind the cost and abilities of the units available.
Galactic pop cap issues are another story. Unless a maintenance cost that others have mentioned is introduced (which is akin to my fave SW strategy game, Rebellion) there is no reason you cant build a limitless military providing you have the cash. I can atest to the sentiments of LIAYD and Fetid in relation to Rome:Total War. On my first campaign attempt, despite total world domination save for the other roman families, I imploded because my military was too large. In fact it was more like two freight trains colliding with an aircraft landing on top! I was actually impressed that it happened because it was realistic. But EaW cannot hope to match games of such grand strategy like Total War, they are too different so I dont think it should try. Stick to its strengths. EaW will always be a game where the biggest army wins. Since there are units to counter everything (which is a debate in itself) this game doesnt simply come down to buying as many of the biggest, baddest and most expensive units to ensure victory. Many do, but this doesnt.
I am not in favour of an increasing cost for additional units. Its not realistic at all. Its not about the cost of the unit, which shouldnt change, its about the ability of the race to afford the extra unit. It does force you to balance your force but balance should be determined by the will of the player not dictated by the game and cost. The necessity to balance should come from knowledge and experience that a player leaves themselves vulnerable if they create an imbalanced force. If they want for eg to buy nothing but cap ships and leave themselves vulnerable to bombers, go right ahead.
What about increasing pop cap everytime you upgrade a space station: the larger the station the larger the force it can service/support. This can be applied to both skirmish and Galactic. The real question is what is the maximum pop cap you would like to have, and what would be the highest that could be supported by PCs without making it unplayable? What if you kept the current pop cap of 20/25 with a 5 point increase for each tech upgrade?