Thank for all the detailed answers guys.
It now seems I started this thread a bit prematurely, with only a few hours of game experience. Since then I've gone through some 40-50 turns, and many of the issues stated in the first post, well, I kinda learned to live with with them, or work around them.

Like this :

1. Hidden units - not much of an issue. They can (usually) be found quite quickly.
2. Chasing small armies - rationalized away as responding to guerilla and raiding warfare, which is supposed to be costly and time consuming.
3. Naval battles - it was me sucking - I've read some guides and they helped.
4. Artillery - buggy, but can't live without them (more below)
5.6. Houses & walls - turning elaborate masonry to dust- still pointless gameplay-wise, but hey...
7. City stealing - never happened again, so I guess it's ignorable.

About artillery being useful or not :

They generally don't kill much(*). However, they enable the rest of your army to do so - the AI feels compelled to leave its positions and attack you once they're out of arty and you still have some ball-hurling devices pointed at them. Needless to say, defensive battles are more cost effective than assaults. And then, there's the morale hit, as mentioned.

(*) Sometimes they do kill an insane amount of enemies - ever witnessed a scene where your dozen cannons unload, simultaneously, canister into the center of a densely packed blob of 4-5 enemy units ? Unholy carnage and instant mass-rout :).
I'm still somewhat disappointed by the lack of killing power for the carcass shot - after minutes of pounding at enemy positions, my howitzers only rake in 5-10 kills each, which is a bit underpowered, considering the impressive pyrotechnics display and rather scary noise they're making.