I'm having a tough time figuring out how the different difficulty settings actually work.  Is there a post somewhere with some more information about this?  I see a lot of people, including myself, having games that are -unexpectedly- too hard or too easy because they don't understand the settings.

My current game has the AI factions on "Challenging", and the general game on "normal" with "sparse" roaming monsters.  The roaming creatures are extremely docile in my game.  I had around 4 bandit groups surrounding my completely unguarded town just sitting on their hands.  Finally, after around 20 seasons, one of the groups attacks the town.  At which point do these monster groups start getting more aggressive?  I've yet to have a game where these mobs act aggressive at all, and they seem to only "activate" after I've moved a unit pass by them.  Is there a way for them to become active without my waking them up?  How does the general challenge rating handicap the AI factions vs AI mobs?  

It's very difficult to set up a game to give you a decent challenge with so many unexplained options.