I Think he was talking about someone else...
So you think I wanted to troll... by posting a long, thought-out thread about a legitimate issue? That's a strange way of trolling.
The AI operating like that was in WB...
That said, Custom Battle mode in Native Warband does not include even the rudimentary AI that is in Native SP battles. Native Warband Custom battles the enemy always charges: no more, no less.
That's because there are no "Lords" in Custom Battles. Only Lords can give orders, and in Custom Battle, the enemy party is always leaderless. In the Campaign, enemy parties without Lords (Like bandits and so forth) behave the same way - no-one's around to give them orders, so they just charge straight at you and die. It's intentional.
I've never been able to figure out why they didn't include an option to give the enemy party a Lord in native Custom Battle.
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I actually have this vain, little hope that the enemy force in the NW Custom Battle -mode is actually supposed to have a commander-like character who can give orders, but he's not spawning due to a bug. This could explain why the AI either just takes up position where it spawns, (the default behaviour for NPCs who have not been given any orders.), or simply charge mindlessly at you. (The default behaviour for NPCs who have not been given any orders in vanilla Mount & Blade/Warband.)