This might be true for FPS and other genres where reflex and speed are the most important factors. However most competitive strategy games will definitely benefit from strong intelligent AIs. For example in Age of Empires, the problem isn't that the AI is too strong (they're not - with enough practice anyone can beat the hardest AI). The problem is that they don't play like a human would, and are exploitable with certain strategies which even a beginner player wouldn't fall for.

Yup. Imagine a boss in a game decides it's not in his best interest to be predictable, or take matters in his own hands and attack the players when they aren't ready. Or any number of things that sounds cool on paper, but would be exceedingly frustrating when actually playing the game.

Industry standard usually means content-free marketing stuff.

Strong AI is a relatively well estabilished term of art in the field of AI: https://en.wikipedia.org/wiki/Chinese_room#Strong_AI

There's a lot of things hyped/marketed as "AI" that are merely algorithms or applied statistics on large datasets. Things that totally miss the mark on the computer science aspects of what AI is suppose to be.