The battle AI is pretty much just from GrandViz's Ultimate AI 1.6, as that was the best in comparison to the others available.
I agree that the AI should do something when under missile fire, but due to the engine limitations, it would not know whether it should move while under fire regardless of enemy nearby or not, and how close.
They do occassionally move into loose formation however from my observations.
Regarding missile targeting, that seems relatively random, usually targeting the first unit that comes into range. After that, the AI targets the most threatening unit normally, so if you get close with a unit to their missiles, they usually start targeting those. I haven't seen them run after another unit trying to shoot at it if another is closer and more threatening.
In sallies, there seems to be an issue with AI not being loaded properly (and to my knowledge no other mod managed to make it work there either) so that only missiles and cavalry are relatively active while artillery and infantry are relatively passive.
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