So the game I'm working on has a universe that has already been fully settled. If it's inhabitable, it's already inhabited. The colony race is over, what now?

I'm having a hard time trying to see how Israel could somehow defeat the United States of America in combat...

From a simulation standpoint, your 'corporative' approach assumes there is a market, not that this is a war machine we're talking about.

Since, in warfare, there is no 'client', territorial claims have much more importance.

Size is often significant, but it doesn't seem to confer a permanent advantage. For over half a millenia the Ottoman Empire used to rule most of the Medeterrainian Sea, and died out only a hundred years ago. Recently the USSR fell. And the surprisingly small nations of England and France used to have colonial ownership over much of the civilized world.

I'm having a hard time trying to see how Israel could somehow defeat the United States of America in combat...

What if provisions hadn't been made for members of the military to continue to be paid during the recent government shut-down? What if the shut-down had lasted a little longer? What if it had coincided with a couple of states seceded from the union at the same time, perhaps starting a civil war? What if there were also a large natural disaster or two?

These wouldn't necessarily need to happen all at once, but even if they occurred one at a time without much of a break in-between it isn't hard to imagine the US suddenly being much more vulnerable to attack.

As AngleWyrm mentions above, large nations/empires/unions have fallen on multiple occasions throughout history, so such an occurrence isn't without precedent.

How about a mechanic where outposts or settlements further from the "core" of your empire are more prone to corruption, inefficiencies, and rebellion? The people there are more isolated, benefit less from the luxuries and protections of the empire, and it takes longer for both troops and supplies to reach them in any case where they aren't self-sufficient.

And the surprisingly small nations of England and France used to have colonial ownership over much of the civilized world.

Which inherently these were big.

Colonies or not, they had ownership of a large portion of the worldwide production.

How about a mechanic where outposts or settlements further from the "core" of your empire are more prone to corruption, inefficiencies, and rebellion? The people there are more isolated, benefit less from the luxuries and protections of the empire, and it takes longer for both troops and supplies to reach them in any case where they aren't self-sufficient.

Or reverse that, so that the 'core' becomes burdened with political infighting, greed, stagnation and too many meetings to get anything done. The smaller colonies could then be thought of as 'starting' with a technology set identical to the core, but being small and nimble, and of less consequence, they could experiment and try new things. Which might lead to interesting new developments. Like New France (which didn't last) or the USA (still happening).

Well, sole 4X game I played was Fragile Allegiance if that counts.

But I think there's room for punishing an expanding empire without infrastructure to maintain it steady. (Roman Empire vs Genghis Khan) Civilization and Total War series add corruption/disorder elements, also could be higher maintenance costs.

Also not all new colonies should be rewarding, some should be burden and/or with trade offs. (Like have to keep a barren wasteland in order to secure a lucrative one)

An obvious way to make overexpansion a problem: make unique assets that serve the whole empire particularly important compared to the resources and assets that scale up with empire expansion.

One capital, causing congestion and burdening with increased travel costs and times citizens coming from the periphery of the empire, instead of semi-independent planets; one leader, who can only inspect and motivate one place at a time, and one central government, possibly overwhelmed by the needs of an increasing population and territory, instead of assuming that everybody behaves well under implicit bureaucrats; one main army or fleet (possibly, a limited set of "hero" units), which regardless of its strength cannot defend all of a growing frontier adequately, instead of uniformly spreading mass-produced armed forces everywhere; irreplaceable research and industrial facilities which require a lot of time and effort to build and get running instead of freely reallocating resources to current needs; and so on.