Yep. I got to the point where I decided not to bother. The AI is spamming 100 dmg spells on my main party, effectively killing all my back row units at best, and everyone except the leader, at worst. I remember I actually finished this game back in the day, but now I just think why bother. Are there any tactics to counter this? Anything at all?

You can only be targeted with spells if the AI sees you. If you have invisibility you can use that to prevent being targeted, or alternatively use one of the spells that re-introduces the fog of war. If the AI favors a particular element you can also cast a ward against that element each turn, as it will negate the first attack by it. You can also try to give the AI other targets to go after, by sending out several cheap heroes as targets. Finally, you can try to capture the AI's sources of mana so that it doesn't have enough mana to keep casting those spells.

Damn, haven't thought about this -_- Invisibility works best IMO. Doesn't cost a lot of mana too.

In my (admittedly not huge) playing experience, the quickest solution seems to be to blitz them. If you don't let them build up a mana stockpile, they can't keep throwing the more powerful spells at you (they'll still throw weaker ones whenever they can.) Even aside from the spell casting, I found I had my best success when I beat down the main enemies as quickly as possible, hitting the standing mobs only as much as was needed to power up my parties, and then spending a more leisurely time treasure hunting once the prime enemies were subdued (although it could be a bit annoying if I found something that would've been useful past the time it was needed.)

Late edit, after more play experience: While the spells to restore fog of war do turn out to be one of the best solutions, here are a couple other options you can consider:

Ward spells grant immunity to overland spells of that type, e.g. Fire Ward will make a party immune to Sinestra Ignis etc. for one turn. Undead Hordes' Templar branch can be a good one to use against a spell-happy opponent, for this reason. I believe tomes will also work in the same way wards do, but I haven't experimented with them much. Unlike in combat, wards don't wear off after taking a hit from an overland spell.

Also, the AI does like to target thieves, so in some cases you can use them as a cheap decoy, especially if you can leave them outside while the party you want to protect shelters in a town. Depending on the difficulty settings and resources claimed, you can try to drain the enemy's mana reserves this way, but it's not the ideal solution.

I finished the first campaign (for Empire) in Disciples Sacred Lands last night. AI gave me hard times with burning my main party with Sinistra Ignis (100 fire damage). For my luck, I was always fond of Ranger type of main hero (from Disciples 2 times that I played earlier than Sacred Lands). So my hero always have a big bag of movepoints plus I buffed it in some of level-ups. And with Haste spell on him (that returns you half of your movepoints) my hero was able to jump from city to city avoiding the devastating AI spellcasting most times.