My difficulty level typically depends upon the difficulty of the faction. I tend to RP / Houserule myself a bit and don't use exploitive strategies (and on the easier factions - no assaults.)
For Romans or other relatively easy factions VH/H
For most of the moderate "Barbarian" style factions VH/M
When I'm feeling Masochistic playing Haysadan or some such H/M
Much depends on your personal playstyle though. I find that if you blitz rebels or factional neighbors at the start - bump the difficulty a notch since you've used an exploitive tactic to make the game easier for yourself (as an example.)
Edit: I run using BI.
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