First, check Sakkra technologies. If they already have Confederation (upgraded Feudalism), captured colony will not assimilate instantly. If not, the bug wasn't fixed.
Here's more info from StrategyWiki:
Advantages: spaceship production costs are ⅔ (67%) of normal.
Disadvantages: 50% less research per scientist; colonies without a Marine Barracks or Armor Barracks produce 20% less per farmer / worker / scientist / taxpayer (yes, your income suffers too), in other words colonies don't get going properly until they have a Barracks and the actual building of the Barracks is slowed by the poor productivity; if the empire's capital is captured or destroyed, the whole empire suffers a 50% reduction in output per per farmer / worker / scientist / taxpayer until a new Capitol is built.
Notes: the manual says that populations captured from a Feudal empire assimilate instantly, but the base version of MOO II does not behave this way and no patch (official or user-developed) has fixed this. This bug is fixed in the version distributed electronically through Atari's website (Windows, version 1.31).
Advanced version: Confederation. Advantages: spaceship production costs are reduced to ⅓ (33%) of normal; populations captured from a Confederation empire do not assimilate instantly (an imaginary advantage, since Feudal populations do not actually assimilate instantly); assimilates populations captured from other empires at twice the normal rate.
Remaining disadvantages: It is not reflected in the manual, but the research penalty is lowered to 25% reduction per scientist; 20% penalty for colonies with no Barracks; 50% penalty after loss of capital, until a new Capitol is built.
Note: Although not discussed in the manual, experience shows that the Feudal and Confederation governments also obtain a 50% and 25% penalty to their research treaty amounts respectively. Therefore, if a Dictatorship would have earned 30 BC from a fully developed trade treaty, and 30 RP from fully developed research treaty, a Feudal or Confederation government would earn the same from the trade treaty but be penalized 50% or 25% on the research treaty respectively. This means they would gain 30 BC from the trade treaty but only 15 RP for Feudal and 23 RP for Confederation from the research treaty.
Feudal's 50% reduction in research per scientist is usually crippling. Feudal only stands a chance as a blitz race in a small galaxy - in a large galaxy, however crowded with juicy targets, some race on the far side will build up an insuperable technological advantage before the Feudal empire's ships get there. Outpost ships are often a vital part of Feudal fleets; they can extend a Feudal empire's range by landing on uninhabitable gas giants and asteroid belts; and they can overcome the "no Barracks" penalty for young colonies because they convert to Marine Barracks when a planet on which they've already landed is colonized (but not by landing on a colonized planet which has no Barracks). These techniques are rather expensive in production cost for non-Feudal empires in the early game, but they exploit Feudalism's one strength, which is cheap ships.
Post edited May 10, 2010 by JamesBond007