It’s always going to be a balance between fun and challenge. In my case, I’ve pretty much abandoned the idea of letting the diplomat character have significant influence over the AI decision. Getting an AI to act intelligent is hard enough, without hamstringing it by dumb decisions.

The player is never going to be swayed in his decisions by what character is sent to his nation to argue for a treaty… why should the AI?

This is a problem developers face with a lot of diplomatic AI. Computer controlled nations can often be persuaded to act against their own interest, either as a quiet buffer zone between two powerful actors or as a cash cow for a predatory player. The introduction of characters complicates this more than a little.

Specific to a game like EU:R, there’s always the possibility of a character’s prestige or influence forcing a player to choose between two suboptimal choices. Maybe you want war, but the prestige differential means you are left with a choice between grudging peace and submission.

But then the player’s personal preferences are left even further behind and the game becomes a matter of murdering prestigious foreign courtiers before they arrive.