If the AI really plays as well as a human.. I don't see how the game is winnable in "impossible" (actually, it's meant to be impossible isn't it? :p) or possibly even hard.
Isn't the whole idea .. on tactics (that admittedly the AI will repeatedly fall for) to overcome overwhelming odds?
Personally it's this part of the game I like the best.. e.g. summoning the ice ball (spirits of rage) solely for the purpose to protect some other troop of mine (their archers, etc. are forced to attack the ice ball instead of my troops), combining stone wall with the spell trap, etc.etc. etc.
And while you may think "Hypnosis" is cheap.. it's not really.. a.. solution for everything?
I don't think it affects undead, or plants, etc.
And sometimes there simply are too many stacks of imps, or otherwise where you're facing level 5 stacks, etc etc etc where you are simply forced to utilise other tactics (in the imps case, use the Dryad's sleep ability.. + gift to renew, to keep all the cerebus + imps asleep while you clean up the other troops)