Diplomacy might be slightly improved, but the AI will still randomly declare war by blockading a useless port. I do find battles to be more interesting in Kingdoms due to the ability to give AI reinforcements limited orders. Also the strategic AI does a better job of making reasonable attacks, especially in terms of keeping it's stacks together.

Unfortunately you'll still encouter the infamous 'stack o' catapults' armies every so often, especially in the late game. I wouldn't buy Kingdoms expecting a whole new experience, just a slight upgrade and some new settings/units to play.