Muslims in Spain own the best and richest provinces, and usually become vassals of the Almoravids or the Seljuks (which is awful, in the second case), and at the beginning are more poweful than the Christian kingdoms. But it's not that hard. I haven't played with Leon or Castille, but Catalonia has a relatively easy way to make itself a place in Iberia: rush to Tarragona, Albarracín and even Zaragoza. It's hard at the beginning, but you can do it. Then, you must get the royal title of Aragon, the easiest and tiniest king title in the whole game, I think. But Navarra usually takes advantadge of his claim (except the House of Barcelona, the rest of the kings in Iberia are descendants of Sancho the Greater (House of Navarra, although the game calls them "Jiménez")), so be careful. The easiest way to get the title is by marriage and assassination. You could also grab the title, because your wars with the moors should have given to you a good amount of prestige. But I don't like the bad boy way. So, I'd marry my son (or myself: kill your spouse!) with a daughter of King Sancho and then kill the other sons of Sancho.
But yes, usually Iberian kingdoms are crushed under the Crescent. That's because the game does not depict the main advantatge that gave the Christians the victory: the feudal system. Moors had some sort of feudal system, called Iqtá, but it was more like a way to maintain a mercenary army. Muslim armies were mainly payed soldiers, mercenaries and forced "volunteers". Christian armies were made of a leading nobility, well-trained for war, heavy knights and foot soldiers. The entire feudal society was made from and for war, Muslim society was made for peace. And this is how Christians won Spain: they were made to it, they had the advantadge. Muslims could use their taxes to pay mercenaries, but Christians could raise every man in their domains to war, and Medieval knights were truly fearsome.