First of all I would remove the word "ridiculous" from the list of options: it is confusing (for a long time I thought it was the easiest setting, since being the last setting available in a rotating list it also is the one that comes BEFORE the easiest setting).
Besides, unfortunately, it is indeed ridiculous at the moment and not in the way it is intended!
Everyone I heard making an argument about chess being so "hard" to program ended up agreeing that programming a chess game is much easier than programming a wargame, this because there are less options involved and because, let's face it, chess is mostly a mathematical game: player that can anticipate and calculate more moves/developments have an advantage rather than being those with more fantasy. I am not a big fan of chess because of that. Also chess has no randomness, while in games like this randomness is basic. In the old game "Warlords" solving randomness issues was addressed by having the game calculate 20 times the results of a battle before deciding whether to engage. That can only work if the auto-fight option is well implemented (very hard to do in this game, I am sure, but Age of Wonders Shadow Magic does a very good job at that, therefor it is possible.)
The AI at the moment still lacks basic concepts:the AI still attacks stacks with its sovreigns, stack that are officially stronger (the AI calculates stacks strengs in an arguable way, but should at least NEVER attack in enemy territory with its sovreign a stack considered stronger.)
Why that is not the VERY FIRST problem addressed is beyond me!
The AI should ALWAYS keep its sovreign in its main city with tons of troops.
Other than that, I am not a programmer: I can only wish good luck to the devs of this great but greatly unbalanced (for now) game.