[MaxWilson]

If by "cheat" you mean extra resources, yes, it cheats. I believe the AI at higher difficulty levels gets 200% of the gold, resources, and (I think) gems it actually "earns." I don't think it "cheats" in the sense of having extra information about your status of forces, except that it knows who owns every province whether it has a scout nearby or not. That's really the only difference between difficulty levels except for the AI getting more points to design Pretenders. I think Difficult = 130%, Mighty = 170%, and Impossible = 200%. I'm not sure, though. KO or JK posted about it once in the forums here but my memory of the details is fuzzy.

I usually play against Impossible AIs using Edi's Better Independents mod. I have found that the AI is actually more challenging with a mix of difficulty ratings (probably because the Impossibles eat the Mighties and Difficults) but I usually don't set games up that way for some reason. I also lose fairly regularly. If I really want to do some role-playing instead of feeling constrained to play "efficiently" I will play against Normal or Difficult AIs.

-Max