I still get AI, but only when players drop. I just dont get matches created with AI's. (Unless they drop right at the beginning in which case its using the dropped player mechanic)
As for what happens when both AI and NoAI are waiting for a game, im not sure. My guess would be it starts a match with the "AI" players, and keeps the NoAI player waiting till it can field a full game. ("AI" isnt a specific option here, just the lack of a "NoAI" switch)
Im not sure though, youd have to ask stardock.