I used to play a lot of PA (Permanent Alliance) games and I made frequent use of the "Why don't you attack..." option. From what I could tell, from many games, the AI actually will target a city that you ask it to target and will send a few extra troops that direction, but it doesn't focus concentration of firepower as a human would. It still attacks other cities, pillages improvements in the fat cross of cities I'm about to take (aargh!) and generally makes a poor ally.
I did actually notice increased tendency to attack the target city when the AI had railroads available. It probably wasn't the presence of railroads causing him to target the city, but the ability to apply more firepower in a single turn that allowed me to notice the increase. Where movement across the map is slow, you might not notice that the AI is actually trying to help attack the target city with more numbers, because the assault is spread over a number of turns as each small stack is able to get there. With railroads leading to the edge of enemy territory, you can see the additional effort as more units converge in a single turn.
Still, once they reach enemy territory, the AI loves to pillage on the way to the city. It drives me nuts to see an ally pillaging towns and villages when it would be more effective to drive straight for the city and capture it. Having a PA is helpful for research purposes or for aiding domination wins, but can be a real pain in wartime.
