There are some configuration files in the SMR directories on your computer; edit those to make the AI stronger/weaker, in whatever way the files will allow you to - I haven't tried that (yet).
As for merge/liquidate, it depends on how ruthless I'm feeling.
Economically, it's totally logical to merge.
Computer performance wise, the game can get choppy with the huge late-game railroads. I'll often merge with the N-2 and N-1 opponent, but then liqudate the last one since I probably have enough stations/track by then (and since competition [making money as fast as possible] is no longer an issue).
Also, IIRC, even when you liquidate, you continue to own their industries. Funny quirk.
liquidate or merge
ux-3 - Go into the SMR main section and open Assets then XML. In there you'll find RRT_Characters.xmlThese are all the little goodies about the AIs. You can duplicate any of them by copying <Character> to </Character> and giving it a name of your own. In RRT_Scenario there is a section called <AICharacters>. Put the new name in here. If there are more than 3 names here yours may not always come up. In each Character there are four skills, BuildSkill, FinanceSkill, OperatorSkill and RobberSkill. The first two are obvious. The third I believe to be how they control their trains. The fourth I would say has to do with going in and taking goods from your assets. Someone would have to go in and experiment with the last two. The numbers are 0 to 4, 0 being the lowest ability I think.
I'm correct 97% of the time..... who cares about the other 4%....