From what I've seen in The Long Road, the AI does not seem to react very well to sieges, it will attack the besieger with an inferior army, then follow up with another inferior army when that fails, repeating until it's out of troops. With Kingdoms it seems to be a bit better, as it will mass its forces before attacking. Both observations are with not very much playtime though, I've been doing EB (RTW) mostly.
I agree that cities should not be moved from their historical positions, of course. This map is probably the best compromise between the issues of small/big.
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