Cambyses II mentioned the most important aspects, so I won't repeat these. I just wanted to add that there are a few more factors, with the indispensable "in my experience" attached:
If you or an AI faction are by far the largest and most powerful contender, most others will go out of their way to somehow harm/destroy you. This seems illogical historically (who would willingly oppose the only superpower?) but makes sense in terms of the game: winning would be too easy otherwise. For whatever reason, the HRE seems to be in this state permanently, notwithstanding their actual strength. Few will ally with them, almost everyone attacks ASAP, even against ridiculous odds and regardless of the overall situation (I had a case when the Aragones were being devoured by the Spanish during a war for Iberia, but instead of defending themselves properly they kept 3+ stacks in the single province which bordered me, the HRE, and even invaded me the turn they lost Aragon....). The Byzantines have a similar, if not that clear-cut, predisposition of being disliked.

Regarding the spies/assassins issue, I'm not even sure if the AI considers sending these as a hostile action. Of course, this is nothing one would to to his allies, but the frequency of 'enemy' (actually allied) agents being caught suggests to me that they belong to the regular order of business.

So the system is indeed quite primitive but way better than the one in RTW where it is not only nigh impossible to get a simple cease-fire out of a battered foe, but also treaties seem to be even far less worth than in MTW (where it's actually possiblöe to remain allied to a neighbour for more than two turns) and they are broken at the first little opportunity to do so. The nasty thing is that it is the player who is treated thus by the AI factions, who among themselves have a rather vivid diplomatic exchange. Don't know about M2TW, my computer isn't up to it....