It's better than Dominions 3 AI... The AI isn't near as bad as it was in AoW, though you can still exploit it, strategically. That said, it does fine in tactical battles, and if you get to the point where the AI is becoming too easy, try it on a harder setting. Cheating AIs are always a bit of a challenge.
Have a look at the unofficial balance patch. While I don't recall it changing the AI at all, it vastly improves the unit balances and (last time I played multiplayer) was more or less mandatory.
Note, too, that certain custom scenarios are harder for the AI. Most notably, the "Epic" or "Building an Empire" mode, where you start with a single village in a world largely empty of neutral towns.
Also, diplomacy with the AI factors in a number of things, such as the number of allies they already have, the alignment of your races, your power, your relation to their race (eg: if you've been razing orc cities and replacing orc populations with dwarven ones, you wont have an easy time winning over the archmage leading orcs) etc etc. I've never really had an issue with it, so I'm not entirely sure what might be causing you trouble.
I almost never protect individual resource nodes. It's a very poor use of your gold and/or mana. Instead, keep a single fast unit on hand to follow the enemy raiders and flip them back. A great unit for that is the Air summon Zephyr, but there are plenty of options either from your racial units or from the recruitment locations. Just make sure you are recruiting a unit compatible with your race's alignment, or they're likely to desert and start stealing resources of their own. Then, every once in a while have one of your actual armies take those raiders out.
You also have options for defending borders. Many maps have natural choke points, such as bridges, mountains, etc, which you can take advantage of. You a pioneer unit to build towns at these locations, or use spells like raise land to wall off a mountain pass.
