The pillage while besieging was in the game, but it was found that it was detrimental to the whole campaign, provinces that changed owners often (and let's face it, with AI opponents at war with each other this happens in a lot of provinces) ended up with no infrastructure even though the castle never fell, and that resulted in the AI only building peasants and other basic troops and also having a severe income reduction, which made the game less challenging.
Now, buildings only get destroyed after you fully control a province. Most buildings get downgraded by one level and you get half of the contruction cost for it, but you can still raze them to the ground completely and retreat if you wish so.
You could intall MTW only to another folder and play a campaign there to see the difference.