Indeed, AIs can not realistically compete with humans in this type of game (yet), and there is nothing more frustrating than cheating AIs...
I don't expect the EU AI to beat any but the most novice of human players one-on-one, but that is not too much of a problem; game balance can be upheld by other mechanisms...
This is what I expect to see:
1) Militarist nations that expand too quickly should find the other European courts increasingly hostile, making alliance forging difficult and the risk of attacks by powerful enemy coalitions overwhelming. Losing a war or two, or expanding more slowly should see the relations normalized.
2) It should be difficult to assimilate captured provinces, especially if the people speak a different language and have another religion. Newly annexed provinces should require large garrisons in order to maintain the peace. Thus, trying to assimilate too many territories at once should tie up the army and make further expansion impossible.
3) Internal unrest should grow in a nation that is constantly at war, simply because the people will grow weary of the increased taxes and high conscription quotas.
4) Uprisings that are not quelled within a certain amount of time should result in one of the following effects: re-emergence of conquered states, re-unification of the province with the previous owner, or the emergence of single-territory 'peasant republics' (like the historical Ditmarsk south of Denmark).
These restraining factors should be carefully balanced to make expansion just slow enough to be plausible.
In your game you should have seen Poland, Turkey, Iraq, Denmark and the Hansa form a staunch alliance and attack you simply out of fright. Furthermore you should have been plagued by constant rebellions in Persia and Sweden, and every other nation nearby should have had a relation below -150 towards you.
