I haven't studied/looked-at the coding at all, so take this with a grain of salt (aka: it's just likely faulty perception on my part):
Fall from Heaven (2) definately is much more 'harsh' than civ/bts, or, at the very least, it's different, which takes awhile to learn/get accustomed to, as you're already learned and becomed used/accustomed to civ/bts.
Once you start to learn Fall from heaven and how it works (and thus the AI), it starts to become as "easy" as civ/bts is for you. You just have to get used to its dynamics (what works well / is powerful vs what doesn't work or works badly) and etc, which does take some time.
Obviously, the 'AI' does have to 'cheat' in the basic sense, as you got to 'teach/get' it to understand/do what we understand and do naturally. It must be taught/forced how to play, at least adequately. It must be programmed. The harder difficulties gives the AI bonuses and/or gives the humans penalties. Sometimes the reverse happens at the lower (easier) difficulty levels: humans get bonuses and the AI gets penalities.
maybe it is because I'm a bit older and I've been practicing, but now I can beat Diety quite easily (with some "cheating" on my part), so long as I don't let the AI get too many more cities than I have (as at that point, its bonuses just overwhelm you, no amount of expertise/skill level can help you overcome it - I think, lol). This is using the vanilla, not the more/better naval ai mod, and etc mods. I actually have more difficulty with civ/bts at the hardest difficulty (diety? can't remember, lol) as I do with the hardest difficulty in Fall from Heaven (diety).
-------
I think the AI does cheat a bit, as I have seen its city spawn more than one unit per turn in it (unless its using some kind of feature like maybe drafting or whatever).
-------
the key to dominating militarily in fall from heaven is PROMOTIONS (QUALITY over quantity of units). unfortunately, this makes the even the 'warrior' (or even the 'scout' !) a super unit, able to crush all opposition, if it gets enough promotions (and/or spell buffs and/or metal upgrade buffs). the mechanics make the warrior/scout too powerful, in my opinion the warrior needs to be nerfed (not sure if there's a way to nerf the scout unfortunately), but not sure how (aside from removing the warrior's 25% city defense bonus - but this is a minor nerf - it needs other nerfs for removing its ability to crush opposition - wipe out human/AI civs).