The AI does have big flaws, and the official forums there's even a thread about how the game isn't that good in single-player. It seems like there's a difference between "hardcore" gamers who can quickly deduce how the AI works and how to exploit it, and gamers who aren't common with similar games and don't even know where to start. The former might like the game, but will find the single-player lacking. The latter might enjoy the game even in single-player. It's not always about beating the enemy as fast as you can; it can also be about fighting a war against the evil, trying to use the weak human commanders in melee, exploring the world, discovering new magic sites etc. This is a Dwarf Fortress forum, after all...
MP games are fun, but competitive multiplayer is another matter entirely. It's not about "is this good" any more, but "what is even better than good". Merely "good" stragies will lose to "very good" strategies, and e.g. some nations start at disadvantage between games played by those frequenting the official forums, because the forumite see those nations as easy to kill in early game and thus prime targets for a rush. Without that kind of bad karma, the nation could do much better, even though it probably isn't in the top-tier.
There are still many variations available for every nation. There aren't as many competitive strategies as it seems at first, but even at worst it's at the level of "because this nation can't counter 20+ elephants thrown at it before it has researched level X evocations, it should take a pretender that can stop elephants", leaving the kind of pretender open. Any size 6 pretender with protection will stop the elephants from trampling, Ghost King can be used to cast so many buff spells the elephants will die or run away without being able to deal any damage to him, Vampire Queen can do the same but is a flying immortal instead of ethereal (so she might need a few more items), a Prince of Death who isn't outright killed will scare the elephants away so quickly it isn't even funny, etc etc. Throwing dozens of elephants against the AI pretty much dooms it, though. Similarly, before the very endgame when the remaining nations have thoroughly researched several schools, insane, undead gods can be summoned, healed from their insanity and made mage-commanders of great power for "just" several dozen gems/piece. While the developers are slow on the balancing, the next patch will include new kind of insanity for these Tartarians, as well as introducing yet other three nations.
Sorry for the long post. I'm a long-time fan of the series, and even was a betatester, so I'm very biased.