I think one of the problems with diplomacy in the TW series is that it maths is so hidden so it is hard to make sense of the AI decisions...

CIV4 as an example shows you the stat of your relationship with the other factions based on your past interactions and positions on the map... So when the AI refuses things or cancels trade agreements it is pretty obvious why.

It is also obvious in CIV4 that the AI is trying to win. If you are right next to another faction and you are both about the same size, unless you setup up a good relationship (with reglion for example) the as the CIVs grow there will be friction and a cool relationship but trade and stuff with still go on. But if you do something to leap head of your neighbour you might well find him suddenly start canceling treaties and starting to build up his troops.

The point is that the activities all make sense because the state of your relationship with the other faction (along with the reasons) was very obvious. Many times the actions of the AI in RTW might well be logical but because the player can;t see the whole picture it does not make sense.

Also the AI in TW is very agressive and when it sees even a small military advantage it will attack without any thought to past events.