DAVE - For level 4 stuff, check out:
http://warlight.net/Forum/Thread.aspx?ThreadID=312
As for Challenge 1, my absolute number 1 thing to do in this one is BALANCE. BALANCE BALANCE BALANCE! I cannot stress that enough. In order to keep both teams in check, you have to knock them out 1 at a time, alternating teams. You also have to remember, that the AIs fight each other and you can use that to your advantage. One thing I've found is that starting in the middle (africa, Scandinavia) you have the AI's fighting each other already, and they're pretty split right down the middle. The reason you're seeing such big troops randomly is because that AI team has pretty much taken out the other AI team and they have a lot of income.
Things you should do; Always keep a good defense, even if the AI has only one in their territory because they will test your open spots all game, and if you notice they aren't protecting, go ahead and nab that territory. Getting and keeping bonuses are very key and so slow BALANCED expansion will lead you to victory.
Like Randy said, practice! It helps a lot. Also look at the history and learn from your mistakes. The AI still does the same strategy every game and you can use that to your advantage. The AI also will usually go after Neutral spots before attacking you.
Hope this helps everyone.