It all depends on how you play, I have gone bankrupt several times over in ETW. Do to losing trade rights do to past wars and new alliances.

As for

Its less fun when you don't get to defend your empire because the AI never launches naval attacks, never invades, and generally just sits around
I have had the AI do all of the above quite frequently on M so I dunno, maybe you should go with medium

Venice took over two of my ports with large navies, invaded my empire, and took out both my school and new church before it struck my capital, weaving around larger defended cities. I was quite impressed considering it was only turn 16...last time I ask venice to become a protectorate