In Rome and Medieval II, the diplomacy AI and the Military AI work completely independent of each other. This is apparently what causes all the messed up descisions the AI makes.
This was stated by one of the CA guys in one of the Empire:TW announcement interviews & suddenly made sense of so many weird AI diplomacy/attack moves. (must be same for Shogun & M1TW as well)
For Empire, supposedly the two AI will be joined & more sensible.