Undead Ermor looks very powerful - and is in SP. AI doesn't handle undead threat well and other AI nations get destroyed rather quickly.
Things changes when you encounter some fanatic Priests in MP- say those of Pythium
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Last game I've played my band of communicating-priest lay waste to a 500+ undead army. After the battle 3 of them were at top of HoF with 100-200 kills each
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So undead are not that unbalanced.