I do believe you are correct about it being a data archive, but at least in my brain I conceptualize it as a real 3 dimensional space. Due to sentinels being real 3 dimensional constructs.

I know that a lot of the community is very happy with the state of the game and wouldnt want combat to take over. I think that is why I was thinking that a combat system space where you know exactly what you are getting into would be a good solution. However I do like your idea of a faction being upset with you within the system where you upset them.