I'll give you what I know, and then you can decide for yourself what it all means. I'm pretty cynical about the whole thing, and have pretty much decided to stop pumping money into the TW franchise unless I hear anything major has changed in the way they make games.
In the Kingdoms Dev thread (
http://www.twcenter.net/forums/showthread.php?t=95285), the ai question was asked and answered like this:
This was before the 1.2 patch was released, so 1.2 was "the upcoming patch." I asked for clarification on page 3 of the same thread, and Caliban didn't answer my question, even though his next post directly followed mine a couple days later. When another guy asked the same question twice, the last with a bit more gusto ("err Caliban!!! Hello???"), he got this response from Caliban:
Was there a switcharound somewhere? Does this mean that the expansion was improved, or that it is simply so because the new patch will have been out and in effect?
This was all I could find from his reference to Palamedes talking about the AI (for the full post, go here-
Link)
All this convinces me of is that maybe they got the ai to make better stacks, which doesn't necessarily equate to better campaign or battle performance, imo.
Unsurprisingly, someone asked Caliban for more clarification:
Here is Caliban's reply (I highlighted what seemed most relevant in bold):
If all this doesn't answer your question about ai, I'm not surprised. Ever since MTWII was announced, I've never seen anything really directly addressed about improved ai, other than to hear them say, "yeah it's better." Beyond that all they talked about was graphics.
Some will say that 1.2 was a significant improvement to the ai, but I'm not all that impressed/convinced. Perhaps a few small improvements, but mostly a placebo effect, in my opinion. Now, the modders out there are doing great things (stainless steel, ultimate ai, etc.) with what they can change, but I don't think we'll see any big changes in hardcoded ai until the next TW installment.
Whew. I'm done with my research paper

Hope that helps!