Observations on diplomacy

Some issues brought to the surface by the "force peace" minimod and renewed interest in modding the AI-faction subsidies have me wondering about the mechanics of diplomacy in RTW, as affected by certain aspects of EB. I'm basing this on MTW2, in which the diplomacy is less of a "black box" because it tells you your reputation, the goals of the other party, and the reasonableness of your proposals -- but I don't know whether the underlying system in RTW is the same.

In MTW2, the harder the campaign difficulty, the faster your relationships with other factions "decay" and the more it takes to keep them positive. Is the same true in RTW, and is this responsible for EB's inevitable Hobbesian war of all against all (or all against me, at least) on EB's recommended VH campaign setting? If so, is there some way to independently modify the campaign difficulty?

Second, in MTW2 the willingness of factions to accept ceasefires is directly related to their overall situation, determined largely by their financial situation. If a faction is broke, it's much more likely to seek peace; this is doubly true when it's at war with more than one opponent, or when it is also militarily weak. So, it's entirely possible to obtain a ceasefire by blockading an enemy and/or destroying his income-producing buildings. But EB subsidizes the AI factions so their financial position is never very poor. By way of example, out of frustration I completely destroyed all Aedui settlements -- only to face full mercenary armies of curepos and golberi curios three turns later, ironically better than the lugoae and slingers I'd seen to that point. So I guess the question is, is this the reality in EB? Would better simulation of AI finances, however achieved, lead to better diplomacy?

Anyway, I'm not trying to step on any toes here. I've devoted more time to EB than any commercially-produced game I've played since my NES days. I'm just curious about a few things....

The M2TW diplomacy is an evolution of RTW diplomacy. In M2TW it shows more leaving you to guess less about the AI stance towards you. Also in M2TW the AI has been tweaked to act more rationally.
Meaning if the situation desperate it won't attack suicidally but bide it's time and maybe go for a softer target.
I think BI introduces the unbreakable alliance feature. Meaning if you do nothing to provoke your enemy and pay enough tribute, they will not attack. Ever.
The reason the AI receives it's cash bonuses has to do with it being totally inept at economics. In the diadochi wars it's not uncommon for a settlement that changed hands a couple of times, to have maybe six different government buildings. 5 damaged and 1 whole. The AI dosen't tear them down even when it could profit from it. If the settlement they conquered has a regional barracks it can use, it will rarely bother building a factional MIC even if it means better units.
A human player can prioritize economic buildings to give him/her an edge later in the game. The AI dosen't unless it has money left, after it spends most of it on it's military.
And here lies the catch. The human player knows that unless you can get your economy going, you're dead. The early army upkeep costs will cause you to go into debt fast, unless you either conquer settlements, or disband your army.
The AI dosen't understand this. It will not disband. And hence without the cash bonuses it will spiral into endless debt, stagnate, and prove no challenge to the human player. It also has the tendency to recruit a settlement "dry" of population so it must be aided in this also.

Bottom line. If a programmer could teach the RTW AI basic economics, one might be able to imporve the AI diplomacy. Until then, we are stuck with trying to balance the cash bonuses to keep the AI challenging but not overpowering.