When i first played AoC2, i played it on "normal" difficulty. I heard stories of the Legendary AI being impossible to beat. A while after i had played enough games to increase the AI level to Legendary. What i experienced disappointed me.
The AI had no absolute idea of what strategy is. It didn't use diplomacy well. It didn't build alliances. It didn't spy me with towers. It never throwed me an ultimatum. It didn't managed its units well. It couldn't even keep its own country in peace but instead it fought wars that were impossible for it to beat and died in seconds! The AI isn't strategic in the minimal.
When i play in legendary, i can invade anyone i want without fearing of another guy doing a surprise war on me, because the AI always accepts my pacts. If a bigger country is threatening me, i just form an alliance or sign a defensive pact, and problem solved. At wars, the AI keeps sending its units to death (and the infamous < 20 unit spam raid), and never predict an attack.
The AI should be able to do a variety of strategies. Imagine an AI that makes you think twice on invading him by signing defensive pacts and forming alliances. An AI that manages its army so that he predicts your attacks (this is an strat that consists on sending units to an undefended provinces that the AI is likely to attack at the end of the turn, to avoid a breach in your front and a micro army spam), and knows if you will attack by spying with towers and increasing relations up to 45. An AI that releases vassals and demand vassalization instead of creating a silly frontier. An AI that fortifies its fronts and makes his country impenetrable. An AI that changes its goverment depending on being a warmonger or building economy. And many things that would make the game very challenging!
To be honest, i end winning every game in legendary i play. No, i'm not bragging, because that is an easy feat. If you use diplomacy well, you can avoid being invaded by anyone. The AI is easily tricked with diplomacy, and if you predict movements you can avoid the spam raid also. Give it a try, and check how easily the AI can be managed. Please, make the AI harder! :p