They didn't "hijack a frigate". They freed a prisoner. It was a prison break. And, no one acted stupidly at all. The prison ship captain acted quite reasonably. Mythical Jedi don't exist as far as the universe is concerned.
Someone steals an engine. Ooo, be still my beating heart. Considering this is a setting with actual pirates hijacking all sorts of stuff - Hutts, the Syndicate, as in organized crime bosses that control entire planets, someone lifting an engine from a decomissioning site probably isn't all that big of a deal. And, I imagine, "Long Live the Empire" isn't a rare thing to hear.
See, the thing is, none of the Republic's actions are all that out of line. An engine being stolen and a prisoner being sprung isn't really enough justification to mobilize thousands of soldiers on a hunch. Again, priorities. Someone steals an engine. Who cares? They steal an Imperial Cruiser? Ok, fair enough, call out the troops. An engine?
Oh, and let's not forget, that this is a setting that's been in a constant state of devastating war for decades. As in entire planets have been destroyed (and in some cases very destroyed). They absolutely DON'T WANT to pick another fight.
People's idea of what is reasonable is really strange.