Many people seem to be reporting this; personally, I've not seen a lack of AI army quality yet. The only issue I have with AI recruiting is those large Milanese stacks containing almost no melee units, mostly crossbow stuff. This might be due to Milan having very few settlements initially and just recruiting whatever is highest up the tech tree - which happen to be crossbow units. Recently, one of their settlements seems to have been upgraded, and they've started recruiting heavy inf in larger numbers.
I'm not fighting them atm, but I keep a spy or two in their lands just to make sure I don't suddenly have to.