LOAF and I were discussing this a couple of weeks back, actually...
The best we can figure (well, ok, it's mostly me
) is that by the Treaty of Torgo (and any subsequent treaties) Confed is allowed to enter Kilrathi space without any formalities, but for the sake of not not ruffling fur ask before entering for most things, like the TCS Devereaux's activities in the Kilrah system in the WCP intro FMV.
You know Deadman, I actually thought that would be a good story line. What if the bugs were actually some how connected to the Kilrathi on a genetic level (lol, like being in disguise as you said). I always thought that would be a neat twist, but I think thats just because I think the Kilrathi were just a really great foe to fight.
Peace cannot be kept by force, it must be achieved through understanding.