About damage falloff vs shield bypass: well... its complicated?
Yes, damage falloff is a very big deal, but so is shield bypass. For the weapons that have it, that's their thing, its what makes them good, or is a big part of it. Damage falloff is a big deal for bypass weapons especially, because they do need to hit hard enough to do significant damage to armor (or have another weapon do it for them so they can destroy hull and components). Phase blasters would objectively be worse than conventional blasters if it weren't for their shield bypass, but a weapon that is special with regard to damage falloff could still be a competitive weapon without it.
That'd be missiles. They do not have damage falloff- or more accurately, have 0 falloff. They do have less accuracy at higher range, like all weapons, so their DPS at range does drop a little. If it had some damage falloff, as long as it were better than other weapons, they'd probably be fine- it'd just be a 'rude' nerf.
As for Damage Falloff making sense:
First, its a more heavy into 'fantasy' type of sci-fi, meaning anything and everything can be described to work because its technological magic- and likewise, their limitations. But this area is not so heavy into the make believe side, for the most part.
Beams will certainly spread.
They're particle beams, and almost certainly charged particles that will push itself apart. Its impossible to keep a particle beam with charged particles coherent over incredible distances, this is the easiest weapon to say is sure to suffer from damage falloff- it is one of the defining properties of such sci-fi weapons.
Phasers are simply special particle beams.
Ion weapons, like particle beams, scatters due to repulsion. Ion beams are definitively special particle beams.
I don't think DW2 has them, but if there were laser beams, they also diffract in space,
as a wave does. Unavoidable. Lasers are not extreme range weapons either- in a more realistic ship-vs-ship scale.
Graviton beams and tractor beams... yes, of course they will lose potency. Its a 'gravity beam'.
Missiles, as is reasonable, do not have damage falloff.
Torpedoes come in many varieties when talking in general about sci-fi. In Star Trek, Photon Torpedoes are long range guided missiles with an antimatter warhead. In Star Wars, they're unguided rockets. Both are extreme examples of 'magic' sci-fi, and Distant Worlds 2 takes the same approach.
But, in DW2, torpedoes are definitively plasma torpedoes, in this case, guided. Unlike torpedoes that bear a resemblance to missiles, this kind of torpedo actively contains destructive energy, rather than delivering something that
will be destructive once its detonated. A super-energized and heated field-contained plasma mass, with guidance, this torpedo can only contain this for so long before it simply loses too much of its power or the plasma destroys it without hitting anything. Its not akin to carrying a giant torch (though that could be a reasonable analogy in some contexts), its like holding back an incredible explosion around the torpedo with a shield until it hits. In other words, its magnetically bottled plasma, and the bottle is guided.
In other words, DW2 torpedoes don't have a warhead, they don't go boom like missiles and some other torpedoes do.
Area weapons, including mines, are also categorically torpedoes in DW2. So they operate similarly, presumably delivering something active rather than something that will detonate. Except these ones do go boom.
Conventional Blasters are very similar to torpedoes, definitively plasma weapons, but they're short ranged unguided bolts.
That leaves Railguns.
And as you say, in space, projectiles don't lose any momentum. Not really, anyway, until they hit something(s).
There ARE two railguns that have no falloff: the Forge Railgun, and the Planetary Railgun. So the traditional, solid slug that purely delivers kinetic damage exist in DW2.
That leaves all the other railguns, and that is a little curiosity that has bugged me ever so slightly as well. I've always hand-waived it as 'game balance'. Thinking about it seriously though, there's a few plausible reasons why most DW2 railguns lose potency at long range:
1. Impact mitigation
While our game can have battles end in seconds, the game functions in days, and the scale between ships can safely be assumed to represent MASSIVELY larger distances. An incoming railgun shot will have time to react, if not enough to evade outright.
So, when the projectile isn't proverbially the size of a bus, like from a Planetary Railgun or Forge Railgun, a ship with a resilient hull can reasonably reposition to better deflect or absorb the hit (even a deflected hit will hurt a lot, unless we're talking about a shield-weakened hit on strong armor).
2. Dispersion
While a railgun is conceived and depicted as firing singular slugs, if it were more realistically depicted, it might be firing bursts or outright scattershot, which is a common hard sci-fi way that railguns are used, because hitting with a singular slug is incredibly difficult. Over great distance, a hit from that kind of railgun means
fewer hits. Not maybe. Certainly.
3. Soft Magic
In a galaxy where gravitic anomolies are common and rifts are being torn open *again*, relativistic speed mass, like the shots of a railgun, may be hitting a heck of a lot more in 'space'. We understand space to be mostly nothingness. That might not be the case in DW2.
4. Railgun slugs aren't just slugs
They may be closer to missiles. Very fast relativistic missiles. Presumably, such a weapon could quickly lose effectiveness, only being able to effectively track where it isn't from where it was to a certain extent. In space, you lack aerodynamics, so if you want the point of the 'slug' to hit, something needs to actively make that happen. Otherwise it spins imperfectly. And despite best efforts, even such corrective systems are only viable at shorter ranges. Unless you're just shooting a relativistic bus at them. Then it doesn't matter if you hit with the wide side.