Question for the experts: Can you create a scenario in smax that has a mix of old and new factions? When I'm in the scenario editor, placing units, I can only place new faction units. Is this the limitation?
No - you should be able to mix the factions (the "create a scenario" option will load the last seven factions you played in a regular game, taken from your alphacentauri.ini file
Either start a new game with the mix of factions you want, then save - and those should be the factions that load when next you open the "create scenario"
or
when in the scenario, select from the left hand drop down menu "reload factions" - that'll prompt you as to which faction you want to drop (eg Gaians) and what to replace it with (eg Pirates)