In my game which I just started (AI level: challenging) the AI refused to settle (I could see, faction power 0) and went of wandering near my capital. My 2 heroes simply got at her and finished her of. Farewell kingdom of Pariden.
Brad I hope you read this and can take a look at this, here is a .rar with a couple of save games and debug.err
PS: I'm not too sure whether this belongs into Beta or Support, it's not REALLY a bug - I put it under bug nontheless