Well, in this instance I was offering them their former capitol, a major Indian city and a minor Indian city. And 50k gold. Meanwhile, my military/economic rating was tops, and theirs was bottom. So to refuse a peace offering made zero sense.

Sure looks now as though once you're at war with someone, it's for keeps. No more brushfires or territorial skirmishing.

Oh, and I tried a theory: I wiped out all provinces that bordered with Prussia, just to make sure they weren't following the logic of, "We share a border and are not allies. WAR!" They still wouldn't take any level of generous terms.

I'd like to see this ironed out. Seems the perma-wars among the AI nations are still at it as well. I mean, sure, it's called "Total War," but that's no excuse for every single skirmish becoming a state of permanent hostilities.