Imperialism II is an example of developers' brilliance, not folly. It is a wonderful gem of a game - I periodically keep coming back to it as it is wonderful mix of a very streamlined design and a very challenging gameplay - think Civ2 without the terminal micromanagement. I really enjoy the first 100 years when you face a myriad of constraints - constantly hitting bottlenecks (iron, lumber, food, ships, soldiers, tin, riches etc etc) unless you plan ahead. It's about the only game I've played where the economy and the building are fun. The exploration and conquest are arguably rather secondary, although still nice.

On your two flaws, Screwtype, the victory condition point is a rather small one. The Total War games were also rather constrained and you can always give up if you are romping ahead (you can play on after victory, IIRC) although often the endgame is far from trivial as even weak powers can defined modern fortified provinces well.

As for Sweden not attacking you, I think that is a feature, not a sign of dumb AI. The designers deliberately did not want a very "gamey" diplomatic AI where the AI factions would gang up on the leader (as in Civ, IIRC) to stop you. They made it possible for you to charm your way to victory. In my opinion, it makes the game richer in diplomatic possibilities and more realistic. (Think US in the modern world). But tastes differ.

The AI does suffer from a couple of absolute killer AI flaws, but I won't mention them here as they are rather gamebreaking once you know about them. Nonetheless, it's pretty competitive. Pick the first faction you generate, play on hard and prepare for an uphill struggle.

I think it's terrible there will be no Imperialism II, I have not played a better game in its genre (TW is better, of course, but that's because of the battles).