The "No Settlers"-option has done nothing but handicapping the AI to the limit of unplayability in the games I have tried it. The AI expands (conquers barb cities) extremely slowly or not at all so the advantage they have initially is quickly overcome by my own expansion, and the challenge is alas not even close to the "normal", sadly I really like the idea, but I have never gotten it to work.
I have NEVER had a game where the AI didn't conquer barb cities quickly and ferociously, are you playing an up-to-date version? if by turn 50 i haven't taken any barb cities close to me, the AI gobbles them up greedily. maybe you play with a small number of civs? i usually play a pangea map standard size with about 12-15 civs. everyone is everywhere. so really, settlers don't matter come turn 100 or so.