No, I'm not playing on the hardest AI settings. The AI has 5 settings in Dom 3: Easy, Normal, Difficult, Mighty, and Impossible. I chose Difficult, so that it would be a little tougher than normal, but nowhere near as tough as Mighty or Impossible.
I also chose one each of the three AI types: Normal, Aggressive, Defensive. I'm not sure which nations are which (b/c they were random), but I'm guessing T'ien Ch'i is defensive, Caelum was normal, and Vanheim is aggressive - though I could be wrong about this.
I do find the AI to be more challenging than in Dom II. In DomPPP the AI would often have extremely large armies, and often kicked my butt, but in Dom II the AI seemed to avoid large armies (my own theory for why this is that it was trying to avoid having more troops than it could feed (in DomPPP the large AI armies were *always* starving)). In Dom 3 the AI seems to once again have somewhat large armies (for example Vanheim's army that was sieging T'ien Ch'i) and of course now it builds castles, unlike Dom II.
Having said that, I think that I probably could have gone up another notch in difficulty (to Mighty AI) and it would have given me more of a challenge. (on the other hand, things might have turned out differently if I had started next to Vanheim).
I haven't tried a game yet against a bunch of impossible AIs. My guess is that early game would be very hard, mid game would be a challenge, but if you made it to late game you could outwit the AI. but that's just a guess.
sorry - kinda long answer to a short question
