The game is basically based around making the AI not behave the same. Certain abilities (like target, or anything that uses runes) simply don't work for enemy units or against player units. Others would require a lot of in-depth thought to use.
The way things work now is that enemy units aren't being commanded by an overall AI, but instead work individually. This makes sense in that all of your non-hero battles wouldn't be against coordinated enemy forces, and non-coordinated enemy forces wouldn't understand the extent of your powers, thinking that the units you used Loki's Touch on were permanently mind controlled or defected or w/e. So in this respect I don't think it's unrealistic that it causes a lot of chaos and interfighting when you use Loki's Touch, that's how a smaller force in supposed to defeat a much larger one.
It would be really cool if there were two different AIs, with a special, stronger one for Hero vs. Hero combat. Normal fights would be you vs. an uncoordinated but much bigger horde and Hero fights being you vs a similar opponent with similar skills.
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