Well, as the saying goes in the game. Something like:
"Spartans dont ask how many, but where are they."

If you want a smart AI - play a different game, or wait for the devs to fix it.

But don't hold your breath, the AI has been near identical from Shogun all the way until now.

Hardest just gives the AI Moral and Attack bonuses to make up for their lack of logical reasoning.

I'm having a hard time sticking playing the game on Hard/Hard, and only on my 3rd short campaign - it's just so predictable. I already know I'm going to win even though I only have 12 provinces and it's 250BC.

I have to say I agree, but I have felt that for all the total war games. Barring a major "effort" on your part, the AI never takes over all your provinces. (Or even comes close.) The only ways I think I lost medievil was by playing dangerously and losing my king/princes. I imagine you could do the same in Rome with all your familly members, but they tend to be more numerous than your princes and better protected running cities instead of charging into massed spearmen :P.

The AI simply doesn't have the agression and intelligence to push into your heartland. While I occasionally lose cities, 1000 odd attackers to the 200-300 defenders, its almost surely only a matter of 3-4 turns before I take them back. If they dont have a familly member I simply bribe for a pittance (By the time the AI is mustering armies of that size the price to pay is nothing. Oh no I wont build something in one of my cities this turn..) As for battles, while I still occasionally lose them if outnumbered the AI never follows it up significantly on the wider front.

While it can be hard if you pick someone surrounded by enemies, only really the selucids come close. This is simply because your next to expansionary powers and egypt is significantly more powerful than you to begin with. Once the initial turns have been and gone however, it returns to the same relative ease of expansion, where only rebellions caused on the fringe halt the advance. (In this case, build some forces to deal with egypt and meanwhile conquer Pathia/Armenia/Pontus and Greece..)

As the Romans I have never seen an italian city fall, nor could I really imagine seeing such happen.

what does increasing campaign map difficulty do? just make it harder to win in autoresolve?

No... money doesn't come by as easily, revolts are more frequent, the AI is more aggressive and builds more, and so on... I don't know if autores is changed by this setting.

I've found hardest/hardest a good challenge, though I am new to the game type and am not the best general.