Diplomacy is broken

[Kobal2fr]

Errrm... pretty much all of your points already affect reputation just that way. And relations decay to so-so on Medium, only on H/VH do they drop below par with time alone.

As to the bit about allies not attacking your enemies, well...there's also a variable (set to false by default) that forces trusted allies (that is, allies who like you, are not untrustworthy bastards, and you're not a traitorous scum either) to instantly declare war on enemies of their trusted allies, which is fine and dandy... but it causes problems in the long run if no well defined powerblocks emerge FAST.
If there aren't, then there will be a lot of alliances made then broken two turns later and in the end everyone will be at war with everyone save for one or two allied factions. Then everyone will become untrustworthy overtime, and it's all downhill from then on. The way it is right now is more subtle.

As to the raids being suicidal for them, well, I'm not 100% sure. If they raid you, and you get really pissed off and mobilize to attack them, someone may seize the opportunity and attack you from another angle now that your forces are tied somewhere. Especially if there's an alliance going on. I haven't yet tested a campaign with the raiding behavior commented off the file, so I don't know for certain what's a better idea FOR THE AI to do.
Oh, I know for the player it would be swell, only having factions he wants to be at war with him, and everybody else cowering inside their puny lands and letting him rampage and grow as he whims... but that's not good diplo nor good AI, is it ?

"garrison up and wait for the possible incursion" is no path to glory. The best you can hope for with such a strategy is "not lose". And "not lose" is not the same as "win", not by a long shot. Think about it from the AI's point of view : it buckles up, grits it's teeth and waits. It can't take other regions because he's *already* at a disadvantage against you, and can't free any of his troops. He needs those to buy some time for other factions and allies to attack you should you attack him.
Case A : you do attack him, and he might as well have attacked you first and done some economic damage to you with a few expendable units before you were fully ready.
Case B : you don't attack him, and invade someone else instead. Now you're even richer and even more powerful, and the situation's the same for him, only worse than it was before.

So it's either "do something and risk losing" or "lose". Not so irrational a choice now, is it ? That, plus if you're going to lose anyway, might as well ruin the leading player's game while you're at it. Keeps the game interesting.