Ok, 1.2 seems to have given the theatre AI an enormous boost.
'39 scenario, Germany overran Poland in five weeks, the only slow-downs being Warsaw and Grodno. Minor encirclements and a constant push made a very good show.
While blitzing, it still held reserve troops to protect my ports in northern Germany.
Re-deploying army group north to the western theatre in two ways, delivered the following:
1. Re-deploying w/o assigning to OB West, giving the army group the attack command on Netherlands/Belgium, then declaring war. Nothing happens. Literally.
2. Re-deploying then assigning to OB West, declaring war and changing the defense-stance to attacking, while giving all of the southern border as objectives as well as some on the dutch border and Eupen. Hell breaks lose. Apart from stacking airplanes, the AI rushes like hounds of hell unleashed and pushes, where it can, even if not given as objectives. It sees its chance and goes in. Great, I love it.
Conclusion: The AI seems to be highly aware of all of the theatre and seems to take all the troops into account. On a theatre level, it seems to be very fast in using its advantage and I did not see any retreat-like behaviour.
If you give provinces bordering yours as objectives, or a clear path of objectives connected together, it will push along this line.
The axis of advance is important, too, but not so, when you go on all-out-offense. Haven't had a chance to work against a strong opponent and see, what the axis does there.
On army group level, it still seems to factor the whole theater in, but only as far as the enemy goes, not as far as the own troos go, and tends to be very cautious, thereof.
AI on army level e.g. rates the polish enemy as equally strong or stronger ... for every of your armies! The theatre rates it weaker and is therefore more aggressive. The army and army group AI seems to see ALL of the polish army as appropriate estimate of the enemy strenght, while only taking the army itself as own strength, ignoring nearby comrades.
For me, it is theatre AI all the way, for now.
Special duty task forces (all the navy and parts of the air force I do not want to have split up) will still be controlled manually, though.
(Chilango2, I hope you do not mind me posting some minor AI tests in your thread to keep mouths wet until you can do an update. Your thread has become the major source for AI control theory, so I feel this is the right place to do so. If you object, drop me a note.)