Dominions 2. AI. Suggestions, that how to fix it.

Well you have to decide on whether or not you want the AI to expand early and at what attrition rate.

I would contend with Indy's being set on 7 (50+ - 80 member armies per province) that the AI would react differently. As the only real efficent way to deal with the masses of LI, with a few support units (HI and Cav) is to have a tougher attack base to keep your army healthy and not waste money.

I would hope that the AI would buy the cheapest most survivable unit earliest.

Example

Ulm (Non Iron Faith Theme)
For the first 10 turns

40% of Production of LI (Maul, no Shield 18 Resources)
50% of Production of HI (Morningstar work)
10% of Production of Cav

All Commanders Master Smiths.

If you have them place them in the right formations with the right starting positions they can effectively still field an army that can kill nearby indies to upgrade their gold output.

After a certain point is reached (Perhaps 50 LI) the focus could switch more to the HI and Cav.

60% HI
40 Cav

Maybe this isn't the best strategy around but if you could put a cap on certain weaker units that they produce or maybe a turn cap; it would allow the progress of the game to be gauged by the AI somewhat generally.