I would like to note the following:
1. Unfortunatelly I am not playing human on human games. THerefore all my notes about playing with computer.
2. Defences arround Lenindrad and Moskva won't help at all. Playing German first I crashed Soviet Air forces and had captured many their aritilery. Having definite force in the air and in artillery will crash any passive defences.
3. The real problem is that AI is REALLY stupid. It does not try avoid the losses as far as I see. In reality Soviets went out of many cities before Germans did attack to save the divisions for future battles. When I am going to close the ring arround couple of cities, AI send there more troops, which is very stupid, in reality need to pull of the forces. Historically Soviets did such mistake only once, in Kiev area August-September 1941, 5 armies was catched in the trap.
4. AI does not understand the idea of force concentration on the narrow front. It try to attack any place hunting for easy targets. This can not bring success to AI in the long term. I am not sure how and if it is possible to change that.
5. Another problem in realism (causing problems in the game balance) is the fact that at least as Germany I can produce too many divisions. Let us take Tank divisions for example (since game is simulating war start at the division level). In august 1942 Germany accepted the following Tank production plan PER MONTH to achieve in 1944:
1) Leopard - 150 tanks
2) Panther - 600 tanks
3) Tiger - 50 tanks
------------------------
800 tanks per month.
Since each tank division in 1944 should have 400 tanks, we are talking about 2 divisions PER MONTH (1 division in 2 weeks == 2 turns) for the WHOLE Germany of ALL types of tanks. For 1941 Germans has around 200 tanks per month production, having 200 tanks in each tank division. This means 1 Tank division 1 in 4 turns for the whole Germany. In this case Berlin can produce T-III tank division each turn + 1 Soviet Tank Brigade (Tankograd?) + Warsaw T-III tank division each turn + 4-6 cities can produce T-III tank division in 3-4 turns. This means for 1941 (excluding Tankograd bug) that Germany could produce arround 15 Tank divisions per month (instead of 1 in reality)! To keep the scenario historically right need to reduce Germany tank division production at least 20 times (since 1 Tank division per month is for whole germany, not only for the East Front). I am quite sure that the same picture could be found on Soviet side. Probably it should be impossible to produce tanks, it should be done by small wonders only. Probably you should have Tank Factory in the city to produce Tanks, and it should have much higher price and time to produce. Maybe in this case AI will change its tactics too.