First, like previous posters said, a good AI is still years away. Believe it or not, even the dumbest players are smarter then the AI. That includes even a november 2001 newbie 
Second, also like others, I don't like the fact that AI cheats. Somehow I consider it unfair : you have to fight with the same weapons. But even though I don't like it, I accept it because the alternative would be booooooring because too easy.
Thirth, I think the AI does a pretty good job as it is : sure he needs to cheat, but his tactical decisions are pretty nifty. I think he only trades too cheap sometimes. Yes that's right : too cheap. I'd never, ever, ever trade luxuries away !

Second, also like others, I don't like the fact that AI cheats. Somehow I consider it unfair : you have to fight with the same weapons. But even though I don't like it, I accept it because the alternative would be booooooring because too easy.
Thirth, I think the AI does a pretty good job as it is : sure he needs to cheat, but his tactical decisions are pretty nifty. I think he only trades too cheap sometimes. Yes that's right : too cheap. I'd never, ever, ever trade luxuries away !
the best defender unit (in CIV II you see flag). Would you do the same if you see undefended city? Sure! This is very logical, and the fact that AI did so, means that this is reasonable AI, and that’s it.
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