When AI Script is activated (check mark set), the AI does not extend its village, no matter whether single- or multiplayer.
This makes sense if the AI is meant to have a small village (e. g. for trading purposes) and shall not extend it, or if the AI village is completely built beforehand and you want to define attack points only.
Destroyed buildings are always reconstructed.
If you want to produce soldiers and set attack points, AI script must be checked.
If AI script is not checked, the AI builds as it wants to, even across the whole map and into other villages.
To do that, it needs a woman and clay.
Rule of thumb: Franks build most quickly, Vikings least, Byzantines between that.