Simple changes by CA that would improve the AI

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continuing with this example, the quality or type of troops is not included in any way, so a huge army of peasents could scare off a small but elite army. so then someway of rating the units in the army needs to be included (can you tell this is going to get complicated?)

Including an algorithm which measures troop quality could hardly be described as "complicated". However, I'm sure your general point that AI programming is more complicated than it might appear to a layman, is quite correct.

even if you use a existing stat such as morale (the best single indicator while not perfect)...

I disagree strongly with this idea. Morale should NEVER be included in AI calculations about whether or not to engage in battle, because morale is a hidden factor. Likewise, leader quality should not be taken into account.

All that should be taken into account in such calculations regarding comparative troop quality, is unit equipment, and the battleground, ie the things that would be visible to an enemy army. Enemy morale and leadership ratings are part of the fog of war and should remain so.

...the increase in processing of fetching, adding and comparing every army battle could be too much.

Not at all. Such calculations would not strain a CPU in the slightest. You just have a rating for each unit type in the game, and then before initiating a battle, you add up all the unit ratings and compare to the enemy total. Simple.