I totally agree with switching factions of inactive or retired players to AI.

In this particular case it seems somewhat similar to what NB did with Poland - using the armies of an inactive faction to his advantage. Mind you that his move would have made sense for Poland anyway, since they were at war with Sicily, too.

All I am saying is that both had one turn of making use of an inactive/retired faction - so it seems all fair to me.
But yes, good time to switch them to AI now.