Yes!.It is very annoying.It does NOT make the game harder.The ai can't fight so why would it be harder?What it does do is make many if not all scenarios unplayable.
example-I start the WW1 scenario included with MGE as Britain.Turn 2 I am sneak attacked by the Americans.So much for the scenario.Back to the usual conquer all game.
Bundling civ2,FW and CiC together was a complete waste of time and my money.
I think it is caused by the multiplayer aspect of the game.You can manually set attitudes in MP which I think wrecks the game
MGE for multiplay only.