I hate playing with the no battle time limit for that specific reason. It makes it easier to win defensives especially if they are assaulting a castle with multiple inner walls, because it takes time to breach each one, and by the time they actually reach you half the time is already gone.
This is a nice strategy, I didn't even consider that it would perk up the AI during a siege! On the other hand, and the reason I don't use a battle timer, is because I sometimes feel rushed (especially when conducting a siege) to win the battle. Would be awful if I was cleaning up the city square and the timer ran out and I lost! On the field this wouldn't be much of an issue but during a siege it would be a concern of mine. I lack in generalship if you know what I mean!