Yeah, I utilize this tactic when large forces threaten to overwhelm. I wouldn't say you were outplayed... More like: you neglected to take into account how the AI works. The AI always targets the most vulnerable settlement of their adversaries. Distance may play a roll, but as AI routinely goes deep into enemy territory to take weak castles, I'm not sure how much distance plays a part in their targeting.
There isn't some grand strategy at work here that "outplayed you", it's simply: oh, settlement x has 300 defenders while settlement y has 500 defenders - we'll take settlement x... wait, settlement x now has more defenders... we'll take settlement y... But wait...