In the handicaps XML file, I put "AI unhappiness" at 135 on immortal and I'm pleased with the results. The AI will have 90% to 100% approval in most situations and the player will usually be ranked last in happiness. but the AI can get into happiness trouble if it conquers too much. Before making this change, the AI almost always had an 100% approval rating throughout a campaign. The AI needs lots of bonuses (which is why so many of us play on immortal or diety), but the happiness bounses are disproportionately higher than the other bonuses.