Correct me if Im wrong, but Kath(the Imperial one) + the Ion Cannon means that whenever you roll a crit result, the defender receives a stress. This seems pretty abusable to me, something like:

Kath Scarlet+Mercenary Copilot+Ion Cannon

means that when you shoot someone at range 3 they receive a stress, because of the text on Ion Cannon: If the target is hit, immediately cancel ALL dice results.

So, if this is right, then what do you think would be good lists for this combo? I like double Firesprays, which is how I found this weird combo. Only problem is that making Kath use an Ion cannon means that you will have almost no firepower, doing a max of one damage per turn with a ship that is 1/3-1/2 of your squad.

No; the defender isn't cancelling the die results (eg, using evades). Cancelling the die results after resolving the ion cannon is a 'system step' like removing unused focus tokens at the end of the round, etc.

it's in the FAQ/errata PDF too for further clarification, but Kath's ability makes it pretty clear

The interaction is exactly as Rodrigo described, which makes her even harder to enable.