I read something in another forum that a potential cause to the snowballing is because when an AI lord defects, they take their fiefs with them. This means that when a faction starts losing, a lot of the lords will defect to the winning faction and take their fiefs with them, thus causing that much more power to move with it. It also explains how one moment my Vlandia faction can be very much present then within a year they are gone.
I think it is related to the Campaign AI option which is present as a string in the xml files so I'm hoping I can find the option itself and reduce it a little to see what happens. They are just too smart so when one starts winning they just keep on going. I think having disadvantaged AI factions group together in alliances to take on a faction that is winning would be an excellent way to handle this as well. It would also make it more difficult for players when they start to snowball other factions and then end up in a war with everyone. Either way, I could play warband for 80+ hours and never have one faction take over everything. I played this for 16 and two factions were eliminated and one faction owned 1/2 the map. 24 hours and they owned 3/4 with only two small factions left to fight them. I created my own kingdom and tried to see what would happen if I fought back to, I had 1000 troops at my doorstep within 3 days and my kingdom was completely gone in 2.