Cranking up the World Difficulty

the only problem is that at Hard and above, the monsters will completely ignore the AI players.

Pretty sure that's not true, it only seems that way. If anything higher world difficulty is harder on the AI than the player in my experience because they love to set monsters loose from their lairs and proceed to have their economy shredded as a result. It really hampers their expansion while a smart player continues on.

can't speak for "above", but my last game with hard AI/hard world difficulty, several of the AI factions lost cities to roaming monsters.

I saw a River Slag quite happily eat an AI faction's Scout on Expert.  Mind you, they consider everything that walks by on two legs to be food.

I just finished a small map game with Dense\Insane monsters and enjoyed it. I set the AI to expert and I wasn't boxed in that badly with mosters so my start was reasonably good. At the end I had one L14 hero and one L11 hero. The AI didn't put up much of a fight at all. I'm unsure if this was because of the monster settings.

I had to restart one game when I also set the AI to insane. My starting location was boxed in with monsters and far away from a city location. By the time I broke out and had a settler moving to the next city, the AI was knocking on my door with a doom stack.

I usually love playing with lots of powerful monsters on the map, the more I have to work to clear out a place for my civilization to thrive the better. Unfortunately the AI can't handle it without increasing their power to something I'm not comfortable with. I like to play on challenging AI levels, if I set monster levels to dense and hard+ then the AI gets completely crippled by the monsters. They have issues expanding, they lose cities, they lose all their armies constantly, it's just not pretty and basically a win by default for me.

I'd actually like to see an AI vs Monster handicap slider, so I could play on a level where AI factions don't dominate me but they can still hold their own against monsters without ignoring them. Something that scales from like a 0.5x bonus (penalty, just for those who may want it) to a 5x bonus, for damage, defense, accuracy and dodge, only while fighting monsters, and maybe not including wildland monsters. With this AI champions and armies should be much more aggressive at killing all monsters in and around their influence area. Just one of those things where while the AI is "cheating" it would only be to imitate what the player does, because it clearly can't do it on it's own.

I seem to recall that the greater the world difficulty above a certain point, the less likely the creature AI is to attack your opponents' cities and outposts,  and the more likely it is to focus on you.

It's true that the higher the difficulty, the less likely monsters will attack AI players.  It's one of the ways they make it harder.  It used to be "never" on Insane, but I think I've seen some attacks in my most recent games, so they may have changed it.  I think I've seen monsters attack other monsters, which was new (I didn't think they did that even at the lower difficulty levels).

If anything it would be AI difficulty reducing monster attacks on AIs, not world difficulty, which I'm certain is not the case at least up to hard. Like I said, challenging AI with dense monsters and hard world difficulty means crippled AIs usually.

Nothing like that is in the XML though, that I can find. Insane AIs have double health and tons of money so can steamroll through monsters on any world difficulty.

not true, in my games nearly alway 1-2 AI players boxed by monsters and cant expand, few times AI was wiped by monsters completely.

I do play with Dense and Expert monsters.

1. Monsters last all game. You aren't going to kill them ALL, and when you think you have, you will find level 20 slags walking around in groups.

2. AI will kill a lot of monsters. Then you will see an increase in aggression because the AI will have higher level units. Then they will usually aim the units at you, which gives you MORE levels from killing those units.

In recent games, I have been "pinned" in my starting city building crap troops. A, Shoot monster in my land with Strategic Spell B, hit the monster with a sacrificial Crap Stack, C, hit the monster with my actual sovereign stack.  That takes care of those early game 140 power Darkling Shamans, and helps my units level to get out more pioneers.

Perhaps the monster difficulty can be changed in XML to give different categories of monsters different difficulty level. (beasts -1, bandits -2, dragons +4, twistid +3...)

However I would suggest less monsters = higher level, more monsters = lower level.