custom factions under AI control

Remember to make a sovereign for them. Then you select that sovereign.

Definitely possible.  Currently playing a huge map, 10 factions - 6 of them randomly ended up being custom factions. 

Faction I specifically built for the AI - Trog, master scout, warrior, trained i think, lucky and vulnerable to magic, sov with armorer - is dominating the map.  I'm currently at the bottom of the power heap with 150 and he's at the top with 350 out of the 6 I've found.  Scary, but fun.

Yes, when you create a new game, your opponents will be selected randomly among all the available sovereigns, including those that you created yourself.

You can also select your opponents by clicking on the "Customize Opponents" button on the third screen after clicking on the "New Game" button.

I did make a ruler for them, the problem is that under customize opponents, the one I made doesn't show up.  The ones added by Stormworld do, just not mine.

Solved, just had to exit the game and load it back up to get my custom factions in the game.

Yeah just make a sovereign with your faction....which you have to do to play it anyway....and that sovereign can be picked out the list of available players.

This actually does my God damn head in. I always want my opponents to only be from the stock list, but in order to keep my own creations out of it I have to customise my enemies, which then means I know exactly who else is on the map! And I'm not deleting my creations, it's a pain in the butt recreating them all the time.

You may wan to play through as a new faction before you let the AI control it and design some units for it, especially if you are using traits that grant items.

Yea it's possible. In fact my AI controlled custom faction steamrolled me.

be careful, if you make alpha nations, they will perform much better than the default ones. They will be better synchronized and you will have a tougher time. If the sovereign is wealthy god forbid, prepare to see 8 cities before turn 80.