I also have preferences.txt in the main rtw folder. But there is a preferences folder as well and the file there is the one which the game actually uses.

And I would rather not let the AI control my precious units. Also, my PC is aging and is now unable to handle the same level of graphics that it could easily handle 2 years ago, even though I increased the ram from 256 to 512 MB. So if your PC is good, go ahead and try it. It might be fun!