I agree the diplomacy was a bit weak, I only used it to get trade rights, bribery, and to complete senate missions.
As for AI difficulty, on the hardest levels, the AI does reasonable in terms of strategy (unfortunately at the end of the day, it works on mathematical formulas and pre-programmed reactions to various situations), but its real-time battle strategy does not improve dramatically.
Ultimately, much hinges on what faction you play as. If you play a Roman faction, your experience varies among the three as you will either find yourself fighting barbarians, Greeks, or Carthagians at the start. At the end of the day, fighting barbarians is by far the easiest while far more strategy is needed to fight the other two (the Greeks more so than the Carthagians).
The one real downside of RTW and the whole TW series is that you can't play a campaign in multiplayer. While I know it would require only the fastest connections and would take enormous amounts of time, it would be fun to try to outwit human players in terms of army dispositions and tactics. I am sure I wouldn't be able to use simple lessons from the Art of War to beat humans (though in the RT battles in multiplayer, it's astounding how people don't follow some of those principals and subsequently are defeated).
It is a different experience than Civilization but I do believe Civilization can benefit from taking some of the successful features of the TS series into account.