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yeah they can't get much better or they would destroy you eventually. Any game where you mow down hordes of enemies would be impossible unless the player is supposed to be overpowered (like in God of War).
Imagine a Call of Duty campaign where every enemy force is played by a human. You'd never make it to the end of any level. The AI needs to have a certain degree of stupidity.

As Scoobes said, Far Cry is an excellent example of great AI that is at the same time hardly believable. Completed Sniper Ghost Warrior yesterday and it was the same there. They can see you from miles away, through the vegetation and they don't need snipers to shoot you down from any range. Also if they are alerted once they automatically turn in your direction within seconds.

I think most problems we encounter with the AI are the bugs. The NPCs aren't dynamic enough to correct their own errors when they make some and that makes them look dumb.