It boosts only AI stats. In RTW the AI gets a morale bonus as well as stat bonuses. Since stats are so vital in the RTW combat mechanics you will sometimes see Peasants thrashing units like Phalanx Pikemen and other such absurdities.
For more realism play the mod Europa Barbarorum. The guys there have great historical advisers, it's actually hosted right here on the .org
Difficulty on the strategy map is not increased on VH as the Ai doesn't get it's intended money bonus. This may vary if you play Europa Barbarorum though, best ask on the forum.
If you're playing Vanilla I'd advise you to play VH/VH as it's too easy anyway. Especially if you are one of the three Roman nations, Egypt, Carthage or the Seleucids. The EB creators advise people to play on Vh/Medium as the units have been thoroughly rebalanced and the barbarian natons no longer suck arse compared to the more advanced factions.
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