You need to understand from the start that ships are a special type of agent and don't really have much in common with army stacks.
Ships function almost exactly like agents, have a specific mission and specific targets, with the same valour stat (called "command" for ships). Ships differ in their ability to be grouped and in their Range, Attack, Defence and Speed stats. The stats are fairly simple to understand - range should need no explanation - if a ship attacks, it uses it's attack stat, if it's being attacked it uses it's defence stat. If while being attacked, it moves to another province, it uses it's speed stat to determine it's chances of escaping. The last one is more useful to the AI as it sees your moves when you click "end turn" and can react to them... this all involves the usual seed number, "dice roll", with the "command" stat improving the chances, etc.
Sea regions are like another set of land regions (provinces) in a completely different "zone" to the land regions. Nothing can access sea regions apart from ships - which only appear there via being produced from a shipwright in the adjoining province. Definitions in the startpos file determine which sea region is used for a particular coastal province to spawn it's ships. This is how ships get into the "sea zone" and there is no way for them to move out of it (it's hard-coded).
There has been a lot of discussion in the past as to exactly how ship/fleet vs ship/fleet engagements work. We still don't know exactly, but due to the random nature of some battles (who hasn't lost a whole stack of Baggalas to a solitary Galley?), it's not clear exactly what stacks do or if stacks vs individuals are better.
In most campaigns in the vanilla game I usually achieve naval superiority early on (far too early) by grouping ships in twos or threes (solitary ships are too tempting for the AI to attack and mean that in the event of a storm your shipping lanes are broken). When attacking I usually break the fleets into individual ships - grouping them back together the following year.
All ships are specific to major or minor factions, so if you want "pirates" then you need to add FN_REBEL to the faction association column for the ships you want the pirates to use. I would advise against this as the AI is hopeless at shipping as it is and most AI factions will be at war with the rebel faction meaning they will have even more difficulty establishing trade routes.
As for mercenaries, I've never tried it - nor mercenary agents for that matter... I doubt it would work - but perhaps try it.
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