In my latest game with patch M, the AI seems to be doing a great job. (On Pangea Map so as not to handicap it with having to deal with oceans.)
It forms Alliances strategically, especially when a faction is seriously in need against another. Vassalage (For the AI) is a common-place result when one nation is faced with overwhelming forces and huge losses during a war. The AI will also break Vassalage when it can but, it doesn't do it immediately if there appears to be a tactical/strategic gain.
The Hero code is much better. The AI seems to protect its Heros a bit better. So far, I've had half a dozen "waves" of attacks from the Calabim, all led by Losha. Now, because she's immortal, her strength is in the high-to-mid twenties. Not good for me.. But, she obviously
leads the Calabim army and the AI RESPONDS when she dies. I've set the Calabim war machine, several stacks and hundred of units, into a panic by killing her in the initial assault and actually have seen them "flee" back to their lands. Of course, it may be due to them running back to link up with her because of the code. But, the game effect is really nice. The AI obviously recognizes the importance of its heroes.. or, does a good job of faking it.

She is always protected and in a deep stack of units. She also "flees" when its obvious she is suffering huge losses that could endanger her life.. this time around..(She's getting a bit tougher to kill though and it doesn't guarantee their assault will stop either.)
The AI does do a better job of using magic and it does promote its units. Though, I'm not sure how "sane" the promotions are but the units seem to be effective. I constantly get bombarded with spells during combat which makes taking efforts to reduce the possible effects of them are completely necessary and not just "flavor." While it's frustrating at times it's also much better than laughing at the AI's lack of proficiency when using magic-based units. Now, magic "means something" when it is in the hands of the AI.
Raiding - The AI recognizes resources and will make a concerted effort to pillage them during a war. I've had to place roving picket lines inside my own borders to keep the AI from successfully pillaging needed resources. The AI has opened up "break-through" points through my lines and flooded my interior with horseman, all trying to pillage resource tiles. BRILLIANT! This is a coordinated attack, not some random group of horseman. In between the waves, I don't get random horseman attacks into my interior. But, during concerted attacks, the AI definitely tries to get units into my backfield to disrupt my resources. I like seeing that rather than the needless waste of sending one or two horseman in every other turn or so like it had done sometime in the past.
The AI conserves its strength. The AI does not attack me ceaselessly, throwing its units into a meat grinder for no reason. It will leave me alone for several turns while building up an impressive array of forces. It still has a bit of a problem in keeping those forces together, however. There are usually a few stragglers not in "formation" with the main SOD's. But, it's much better than it used to be with the AI trickling in attackers that could be mopped up with no effort. Now, the breastworks are under massive assaults with short lulls in between. Attacks are not the standard "trickle in" attacks the AI used to do seemingly just setting a waypoint for unit production. These attacks are "en masse'" and much more effective. The AI waits until it has a sufficient number of troops and doesn't needlessly waste them.
The AI still doesn't understand how to conduct a naval assault and landing of troops. I haven't seen something like that from any FFH2 AI since waaay back. Even then, it was spotty. Now, the AI doesn't bother with it although it does build ships which is certainly a step in the right direction. It does attack cities with those ships and will use units like the Octopus Overlords priests with Water Walking to some extent. But, it does not load up units on a transport and then land them in hostile territory that I have seen. That's not, necessarily, a terrible thing if everything else is working correctly. Plenty of games have trouble with proper AI concerning oceans.
The AI doesn't seem to understand the complex uses of the various World Spells. That's OK. It's not easy to understand when the best time for using them would be anyway. At least the AI actively uses them and doesn't just pop them all off on Turn 0.
I'm really enjoying the "new" AI in FFH2. It's a breath of fresh air. Now, the AI can be appropriately difficult on all levels of play.