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The AI is not that impressive IMHO. And indeed the AI "cheats", it gets more design points/gold/resources when set above normal level. Plus it gets information about where your provinces are to cast some spells on them.
Problem is that it builds mainly tons of low-end units, and has no idea about pretender design, bless strategies, or anything magic.
Still I agree it's a fun SP partner on small maps, as you are hard-pressed containing numerous AI armies in the early game.