What am I doing wrong?

Did you copy any of the actual .csf files?

There are some precise instructions here:
http://www.captainkwok.net/balancemodhelp.php

Space Empires Depot | SE:V Balance Mod

this is what I do for balance mod and my ship sets as the shadows for example.
copy the .csf files in BM\empires\Xiati folder renaming them shadows, put them
in BM\empires\Shadows folder. With them add the Shadows_AI_General.txt that came with
the shipset and this modified Shadows_AI_Main.txt;

=======================================================================================
AI MAIN DATA FILE
=======================================================================================

=======================================================================================
*BEGIN*
=======================================================================================

Is Empire Race := TRUE
Is Available For Player Selection := TRUE
Is Neutral Race := FALSE
Empire Name := Shadows
Image Empire Flag Set := Shadows\Shadows_Flag_Set.bmp
Image Empire Flag Main Texture := Shadows\Shadows_Flag_Texture.bmp
Image Empire Flag Ship Texture := Shadows\Shadows_Flag_Texture_Ship.bmp
Image Empire Flag Fleet Texture := Shadows\Shadows_Flag_Texture_Fleet.bmp
Image Race Smaller Portraits := Shadows\Shadows_Race_SmallPortraits.bmp
Image Race Medium Portrait := Shadows\Shadows_Race_Portrait.bmp
Image Race Large Portrait := Shadows\Shadows_Race_LargePortrait.jpg
Image Vehicle Main Texture := Shadows\Shadows_Vehicle_Main_Texture.bmp
Image Unit Main Texture := Shadows\Shadows_Unit_Main_Texture.bmp
Image Unit Combat Texture := Shadows\Shadows_Unit_Combat_Texture.bmp
Image Topdown Shipset := Shadows\Shadows_ShipSet.bmp
AI Script File := Shadows\Shadows_Main_Script.csf
AI Script Empire Setup File := Shadows\Shadows_Setup_Script.csf
AI General File := Shadows\Shadows_AI_General.txt
AI Ministers File := Default\Default_AI_Ministers.txt
AI Speech File := Shadows\Shadows_AI_Speech.txt
AI Strategies File := Default\Default_AI_Strategies.txt
AI Warp Transit Types File := Default\Default_AI_WarpTransitTypes.txt
Inventory Configuration Slots File := Shadows\Shadows_InvConfiguration_Slots.txt
Ship XFile Classes File := Shadows\Shadows_Ships_XFileClasses.txt
Design Name File := Shadows\Shadows_AI_DesignNames.txt

=======================================================================================
*END*
=======================================================================================

This will use Captain Kwok BM AI for that race and plays alot better than the defalt AI.

When I release a shipset the .csf files are from the stock game files version at the time and need
to be replaced with each new patch if you play stock games.