But I have yet to lose a battle(this is on very hard battle difficulty). I've fought probably 15 battles(most of them very small) that werent in cities, and the AI didnt really do anything. In one of them I was fighting the french, they had 300 cavalry and I had a bunch of archers and crossbowmen. The cavalry just sat there till my archers were almost out of ammo, then they ran away leaving most of their men dead on the field.
that's the passive ai bug, its known about and will be fixed in the first patch.