Might as well throw in my 2 bits as well. I have to say, I don't really like the combat much. It's far too shallow compared to the depth of the rest of the game. It feels like I'm being forced to go paddle around the kiddy pool every few minutes when all I want to do is explore the nearby ocean. The outcome is pretty much binary. You win and get to continue playing the fun part, or lose and thus end the entire game. (A few variables aside that can allow you to get extra goodies out of it, or withdraw which effectively does nothing and makes the whole exercise moot)
I'm not feeling the risk vs. reward is properly balanced here. I don't know where the solution lies, maybe losing doesn't need to mean a game over (or really a reload which, if as assumption that the player is going to save scum is factored in as part of balancing, I would argue that balance is off), but instead you escape but have to waste some months repairing your ship before you can do anything else. And when I get a game over screen in TLF, that feels like it's time to quit. I don't feel like reloading and trying again, and I don't feel like starting a whole new game, I feel like doing something else. The game shouldn't be so actively encouraging people to stop playing it. A prominent option to reload the last autosave before combat on the game over screen would be a bandaid fix, but really mistakes just shouldn't be so fatal.
That's the overall view, but getting down to the gritty details, combat just feels like a confusing mess right now. This is partly because I'm still getting used to the game. But that's going to be a problem that every single player is going to have to deal with, and we don't want bad first impressions turning people away. There are a plethora of little problems here that all add up to an experience I find it hard to enjoy. Most obvious is the screen clutter. Shots everywhere, tiny ships everywhere. Lots of little things, and no way to prioritize what's important and what's not without mousing over hundreds of dots and reading tooltips. Is that little pointy cylinder a highly dangerous missile that's going to punch through half my health? Or is it just a piddly fighter that my guns will probably destroy without me even noticing its existence? There's almost no at-a-glance way to read the battlefield. An enemy that's on full health and an enemy that's almost dead don't seem to have any visual difference (sans shield graphics), so I've got to mouse over them and look at health/shield totals that may both be 6 digit numbers. Not that all of this isn't doable, it's just not really helping to make fun happen.
When you do die, there's no after action report or combat log. No one stops to tell you the license number of the truck that hit you. You might have been flying along through apparently empty space trying to get away from the bullet hell, like I was just earlier today, and blow up. Why? I don't know! I can never know! Sometimes I die with full shields. I guess there are weapons that punch through and ignore shields? OK, but how do I know? How do I prioritize what to run from? Like everyone else has mentioned, the best tactic seems to be constantly running from things and slowly kiting everything to death. Effective but very dull.
Usually games that have multiple levels of high strategy and up close combat have options for auto-resolving battles. (Total War, Mount & Blade, Endless Space, Divinity: Dragon Commander, etc. etc.) There are usually many randomness problems with this, but that aside for now, I find myself wishing that TLF had a way to do this. With the current mechanics, it wouldn't really make sense, of course. Since your combat outcome is a binary 'achieve your goal' vs. 'lose the entire game' it wouldn't really make sense to have an RNG decide that. But that just sort of spotlights the problem.
I should also mention that I've been playing so far on Easy, just trying to find my footing. And yet I have had several fledgeling games fail due to inexplicable deaths in combat. I don't think I'm especially terrible at games (although that's always possible) but I'm also not sure what I'm doing wrong to get instagibbed, again, due to the game ironically providing me with so much information on the one hand that I can't sift through it (through mouseover details and a busy bullet hell playing field) while not providing me any information about what killed me when I do die.