I'm far from an expert on the subject, but I don't recall the AI getting any smarter regardless of the combat difficulty setting. They still brainlessly charge headlong into phalanxes and don't protect their flanks worth a dang. They just get enough bonuses to make their terrible tactics marginally effective sometimes.
Hmm, a controversial post Rick, as far as I know (afaik) they do appear to be more tactically adept. I can also back up my statement not with any proof as such but in my personal experiences I hardly ever got flanked on medium settings, on very hard though every other battle I got flanked, and the AI generally made a pretty decent show of themselves on the battlefield. Of course they still make mistakes and still they bring mindless formamations of units to the field.