Difficulty level

[caravel]

I read that the AI gets morale and other bonuses on higher difficulty levels. Is this just the enemy AI or do my AI allies also get these bonuses?

The morale bonuses only take effect on the battlefield, not the campaign map. So any AI faction that you happen to be on the battlefield with, whether friendly or not, will have that bonus. The bonus is only effective on expert level. on easy level it's you that gets the bonus. Normal and Hard don't give any -morale- (edit) bonuses. Personally I mostly play the hard difficullty and rarely the expert, because I like to use tactics that rout the enemy units off the field, not butcher them to almost the last man and artificially inflate my own unit's valour.