I always turn on permanent alliances because otherwise diplomacy has little purpose on higher difficulties. Without PA's it's pretty much impossible to win any victory on emperor or above without significant aggression and expansion. I think it's balanced because it's very, very hard to get a PA with the AI on emperor or above.
Just finished playing an emperor game as Saladin. Small continents, standard settings except for enabling PA's. Started on the large continent with Louis, Frederick and Caesar, Huayna Capac on the other continent. I only built 3 cities and enough military to station 4 units in each city. I was a complete pushover to everyone, offering no resistance or threat whatsoever. I had no state religion except for when Louis or Caesar threatened me, then I would just switch back to no state religion after the requisite four turns. I did the same when they wanted me to change civics. I stopped researching after nationalism and liberalism to go for pure culture/great artist production. During this period I kissed up to everybody, and eventually got a defensive pact with Huayna Capac. After keeping this pact for quite a while I talked hin into a permanent alliance, which rocketed me into a share of the tech lead and made me very rich. By this time Caesar was building tanks and I was still upgrading my longbowmen. Caesar invaded, and I took advantage of the huge happiness bonuses from the 100% culture to draft numerous infantry. I also bribed Louis into attacking him (Caesar had already eliminated Frederick). I was able to fight off the invasion and raze three of his cities. Once the world had beaten Caesar into submission I was able to reel off the culture victory while Louis was starting his casings. Overall I would say that the PA was instrumental in this victory and I will be enabling them in every game I play from now on.