Txurce
Deity
The reason for the AIs poor performance is Palaces no longer give 5, and gold can't be used to buy wonders. AIs generally prioritize food in the capital, so it has lower production for AIs than old versions.
In v151 people were saying the AI never gets wonders. If a 25% bonus means the human can never get wonders now, we can try a middle ground like 10%.
Other than something being broken, nothing is less enjoyable than poor AI performance. I would think addressing this by returning more hammers to the capital would come first, and resultant potential balance issues second.
(In my one experience, the 25% bonus makes the AI competitive in the early game. It was by no means OP.)
I agree that the city default focus is a problem. For example, it will prioritize a 2 food 1 gold coast tile over a 3 production 2 gold mined riverside Gold tile, as long as you have a happy empire. This is clearly giving the AIs problems, particularly early in the game when the empire is really happy. They will never be competitive for wonders when they are working all the coast tiles first.
This is an annoying aspect of the City Manager, and an excellent point with regard to the AI. And adjustment here, if possible, could really help the AI. (Boosting their gold some other way, if needed, should be pretty easy.)