Kudos to Brad. The tactical AI was much improved in version .86 of the beta. I felt that the AI did a much better job of challenging the player but there are some areas that I feel could make a difference on both sides of game. Some of these recomendations touch on unit design.

• When tactical battle is between the AI custom factions and the player, tactical battle fields need to be the largest tactical field that is currently used. In many of the battles, the two sides start out too close together and this is a bigger disadvantage to the AI than it is to the player. Since the player usually waits to get first strike or casts haste and then gets an immediate 2nd turn and is at the AI players front line. The battle field needs to be designed so that a player unit is still out of range of the AI battle line even after haste has been used.
• Trees absolutely NEED to block LOS attacks! The already are considered blocking tiles because you can't go through them, make them more useful by allowing damaged units or unprotected units to use them for cover or partial cover.
• Spell Casting Times are not a fun gameplay mechanic - I have played two games under .86 and several more under prior betas and almost NEVER use a spell that has a tactical casting time. Tactical battles happen far too fast to waste several turns attempting a high mana spell that may not even be useful. Also, the AI never uses them either. I would scrap the whole casting time dynamic, and change it so that all spells are cast immediately. This is more fun and the AI then can choose from a greater selection of spells. As to counterspell, I would change this to some thing like spell disruption which when successfully cast on a target keeps them from from using a spell for 1 to 2 turns. 
• Spells that create movement and LOS blocking are needed. Things like a fire, water, air or earth walls that can be cast to wall off movement and block LOS attacks would be a lot more fun in tactical battles, allowing the player (and the AI) to create a choke point in order to use melee units to advantage or something to hide a damaged unit behind in order to give it a chance to use a heal.
• Do attacks from the flank or rear get additional bonus to accuracy or damage? If flank or rear attacks get a bonus, could we get a floating message for a moment that says 'Flank Attack' or 'Rear Attack'. If this mechanic is not in the game, is there a reason why not? Swarming a unit with multiple units is great way to take down a high HP unit and this a good reward for units that take that chance.

• AI heroes never MOVE and then cast so they wasting a potential tactical advantage. While there is certainly a reason not to use movement, usually you want to move before you cast your spell. For example, in a tactical battle, my hero will maximize it's movement toward the enemy, cast HASTE at the end of the movement and usually moves again. This time right to the enemy line where I can attack first at a important or vulnerable unit.
• AI never seems to use HASTE (I have seen it done rarely, but not too often) and they never use it on other units, only themselves. Movement is a big part of a tactical battle and this spell, if available should be used more often by the AI.
• The AI almost never goes first (or 2nd or 3rd for that matter). I've had battles where every unit in my army has had at least one attack and sometimes two before the AI even gets a turn. Either this is a bug or the AI isn't maximizing using initiative.
• The AI doesn't seem to maximize or even use unit traits very often. The AI should be maximizing the unit design and use every trait slot available, especially ones that concentrate on movement and initiative.
• Maybe you don't want to use this mechanic for the player, but AI designed units should always use the ability to upgrade weapons at the very least. Late in the game, I'm coming at units with magic weapons and I'm still facing experienced AI units with clubs or basic spears. Unit weapon upgrades are very cheap and the AI should look to do that as often as it can.
• I rarely see AI horsed units, but often see AI warg units. I wonder if this is a bug where the AI is not seeing that they have horse units available?
• I never see AI units with a defense greater than 9, so either they are not focusing on getting better armor beyond leather or if they do get it, they are not designing units to use it. 

Just some of my thoughts, but it's my strong opinion that Spell Casting times need to go. Actually this play mechanic belongs in the Strategic area but it just doesn't work in tactical battles.