As far as A.I., it isn't our problem as players. Good A.I. is what we should expect if not demand. Besides, one cop out that game developers can to compensate for the sorry A.I. is to make the game harder for us players somehow or allow the A.I. to cheat a little more.
I do think that we should be able to rebuild the Forbidden Palace somewhere else.
However, I think we should be able to build more Forbidden Palaces depending on how many cities are in the nation. This would greatly help reduce corruption in larger nations.
I'd like to bring this up as another topic, but with the option of having more Forbidden Palaces, I think we should bring back Civil Wars.
Civil Wars are pretty common in real life. If one occurs, then one of the few Forbidden Palaces would be the main Palace for the secceeding nation, while surrounding cities would be part of the rebellious nation. The greater the nation, the greater the possiblity of civil wars, or other criteria.
So yeah, it makes a lot more sense to rebuild a Forbidden Palace before moving the capitol of the nation.