Is the AI smart in Heroes 3? Well, yes, "smart," playing against 7 AI opponents on a small map on very hard difficulty is an easy game.

On a small map, ANY AI is easily defeated. But I'm fighting 7 AI allies on a mega-large map (large map sizes were introduced in Hota), and it's VERY challenging. If even one of them gets diplomacy...
In one game, I killed six out of seven. And suddenly, a necromancer (stats of 40) with 3000 Magma Elementals, 2000 Liches, and five more units of level 5-6, about 700 each (approximately, of course), attacks my hero (a Beastmaster, level 37, with stats of 30-50). And no amount of resurrection with an explosion helps me (he also summoned five hundred Fire Elementals and killed thirty Hydras with an explosion). He defeats me, losing only 10% of his army. And that's what you call a "victory." And this was even before Hota.
In short, killing an AI before it develops is one thing, but fighting 7 developed armies is another. One mistake – death.

Added 2 minutes later
Unfortunately, you can't set a priority for spells. So, may combat scripts be with us.