Its my understanding that medieval politics was quite chaotic and fragmented. Parts of your 'state' could easily be allied with a nation you hated, while at the same time you could be temporarily allied against a common foe while, in fact, still fighting each other. In some areas (early Spain, for example) Christians and Muslims would ally against a common foe on occasion. El Cid actually fought for a Muslim lord originally, I think.

Anyway, it doesnt really matter. Being 'allied' with the AI essentially gives you priority for being attacked and not much else :p