Not just that - in previous versions, the giant armies may have been the most obvious effect of the AI being "unrestricted"..... but it is not t he only one. In short, it is about actions having consequences. When i raid a caravan, then i expect the economy of the city to be hurt, which in turn means that the lord which owns this city will be hurt, which means that part of the faction gets hurt.... get the idea? Same if i beat a lord-army..... I do not expect it to magically reappear just 3 HOURS after i completely anninilated it. If an AI-player is not affected by the "system", then this means, that whatever you do, it DOES NOT MATTER!
Another issue with this, is a general feeling of unfairness. How would you feel, if you'd play chess with another player, who can move his units however he wants, and if you actually beat one of his units, he will just place it on the field again two turns later? And how would you feel, if someone else tries to justify that, by saying that you are simply too good at the game, and that therefore, the other player should be able to do whatever he wants.... well, i certainly would reply "Then get me a better opponent, damnit - or apply some kind of handicap to me... but stop this crap."