Lots in this thread, clearly still a hot topic!
Frogboy, I've said it before and I'll say it again, I'm very impressed by the continuous improvement in this game. I've been playing it fairly constantly for months now, and I can't think of any other game I've played where that has been true; I'm normally distracted by a new game at some point. There are a couple of reasons for this; one is that all the factions play very differently, so completing the game as each of the factions is an absorbing goal in itself. This is vastly different to Civilization, where you might get one slightly better unit and slightly different starting technology. The other reason is the continuous improvement; it's worth playing again to see how the AI has improved and how strategies have to be modified because of balance etc. changes. In twenty or thirty hours playing 1.4 and 1.5, I can't really remember the AI doing something which was outright dumb, and that's vastly improved from Legendary Heroes 1.0. Does it make slightly inferior choices to those I'd make? Yes, probably, but that's how I beat it. I don't expect it to be as good as a human player, but it takes some of the fun away if you think you're beating up an idiot. I don't get that feeling any more, which is great. I'm fairly sure I've said before I appreciate how the AI casts strategic spells, but if you didn't see me say it, I'm saying it now! I provided a lot of feedback in the hope that this could be implemented in a good way, and it seems to work pretty well.
Are there things I occasionally criticise slightly in the hope that they may be improved in the future? Sure, but this is in the hope of getting a better game, it's not meant to be ungrateful for all the work which has gone before. For example with strategic spells it's annoying that the AI is apparently able to cast the same immobilizing spell indefinitely, when the player is not allowed to do this. It would be nice if this was fixed (or alternatively if a counterspell was added for multi turn strategic army spells). It would be great if the AI built more prone resistant units, even if just with Boots of the Spider. In an ideal world if it lost a battle where its troops were getting knocked prone all the time it would build more prone immune troops. But I have no idea how hard that would be to program, and in general I am extremely grateful for all the improvements which have already been made.
In terms of faster travel, personally I use Stables in Outposts, so perhaps if the AI could work out how to upgrade Outposts that would help.
In my current game I had an encounter with wildlings where most of them swarmed me from the start but a single enemy (warrior?) and one group just sat there while I mopped up the ones that attacked and finished those two off. Another encounter was in the quest with the three dark mages trying to drain the life from the spider queen. Two of the mages cast spells at my group but one of them just sat there waiting to be dispatched.
Had you cast Wither on the Wildlings? Units with zero attack will behave as you describe. Perhaps they should try to close and use swarm bonuses, but it's understandable a zero attack unit doesn't do much. In the second case it may well be a problem with the spellcasting, which was heavily modified in 1.4. If you can explain in more detail (maybe provide save game and debug.err) than the developers may be able to fix it.
Re: Yithril, bit hard to say, but it sounds to me like it might be the "war on two fronts" problem, and perhaps the diplomacy could be tweaked so that the AI avoids wars on two fronts if it can, as the strategic AI does seem to have some problems in those situations.
In terms of dangerous AI vanilla factions, Yithril is dangerous, I personally find Capitar normally expands very effectively. Tarth (devastating ranged units) and Resoln (hard to hit high dodge units) both build armies which can be hard to beat.