I like how the Rebels are actually a real threat now, rather than an irritant with no challenge.
But it seems in the game I played (only 150 ish turns), the AI factions couldnt really expand into the rebel cities, as they were just to strong for them, and they couldn't really attack me as their resources were bogged down fighting rebels. So as England, I gobbled up all the rebel settlements in the UK, France Germany and several in Jerusalem as the AI couldn't take them.
So then when I come to face the AI factions, I am already a rather sizeable faction with massive armies and resources.
Facing the factions seems a bit pointless now, as it's like slapping down a kid after you have fought a 400lb gorilla, maybe some kind of AI bonus vs rebels, or beef up the AI factions, I dunno.