The patches definitely increases the difficulty, although on Hard I think that's mostly incidental. Part of what you're seeing is just cleaned up algorithms and once-useless spells becoming more useful. The AI is also now much smarter about expanding quickly. 1.5 also makes it slightly easier because diplomacy is now functional - you can now actually negotiate with the AI.
Sometimes it's a crapshoot, too. Sometimes you'll roll a start ten squares away from a wizard with Conjurer, a bunch of Chaos books, a Chaotic or Ruthless personality and a Militarist objective. Unless you're playing a seriously cheesy build there's almost nothing you can do in this case - enjoy having full stacks of Hell Hounds breathing down your ass while you're still working on that Granary. Ugh. I hate Sharee so much.
Other times, you'll roll a start where the closest wizard is a fair bit away, has a cooperative or at least not obnoxious set of personality and objectives, and a whole bunch of spellbooks in common with you. You'll get an Alliance going and spend the game swapping spells, filling in each others libraries until all the other wizards are dead and you turn on each other like the dogs you are.
One thing worth noting is that diplomacy does hinge a fair bit on your overall strength. Check your Astrologer - if you're falling too far behind, even a Peaceful Perfectionist Ariel is going to be tempted to start carving up your territory. In my recent game, everyone had declared war on me (although most of them were too far away to matter). I just built a stack or two of Berserkers and suddenly everyone wanted peace and Pacts and Alliances.
On higher difficulties, you need to expand quickly and pay attention to diplomacy (except on Impossible, where IIRC the AI still mostly just declares war on you).
