When the difficulty of the computer player is set to highest they are really smart and agressive. Not to mention very strong and very hard to beat. Even I as a seasoned player have difficulties. Anyone else feel this way too?

Not me. I mostly gave up on AOW1 due to the poor AI, and I would only play user made linear quest maps like for example "Paladin's Quest" nowadays, or perhaps maps where the AI starts with an overwhelming advantage.

The final straw for me was a game where the AI would confidently move his entire army (several army groups) towards me. Next turn I built one average unit and then the AI withdrew with all its unit. Next turn the AI had built a new unit and now it calcuated that it had good odds again. Then I built a new unit and the AI withdrew again. And so on.
If was tragic and hillarious at the same time.

The general AI is better in AOW:SM, but the AOW1 AI was better at using ships and could have different "personalities", like the undead razing everything in their way.

Another problem with AOW1 is that it's too easy to take out enemy leaders with your own super heroes. SM is better balanced (no super heroes out on genocidial rampages) and the enemy Wizards harder to kill off.