Some good questions, I'll provide some answers.
1) As Darvin said, yes there will be an AI option in the Online Skirmish mode. If you don't have any human players, then it will just generate an Offline game, you don't need to be connected to the internet to play a skirmish against AI by yourself.
2) Combat is basically controlled by "dice rolls", much like RPG combat, you will have dice rolls for attack and defense, between the two combatting units. I'm not completely sure on the exact math, but I think how good the attack or defending action works will be determined on the difference between the rolls. E.g. Attack rolls 8, Defense rolls 12, Defending unit would Block & Parry the attack, or Attack Rolls 9, Defense rolls 5, Attack does extra damage from lack of defense.
3) At the moment you have to build your own peasants/workers. I'm not sure how an automatic peasant/worker creation would work, as I haven't played settlers. It would really suck if you were waiting for enough resources to create another group of infantry, when as soon as you got the resources, the game made a peasant and wasted the resources you've been waiting for.
4) Units will be managed in batallions, as Darvin suggested, we are still fine tuning a "cap" for how many units you can create. At the moment, Dawn of Fantasy's Mithril engine can display over 1000 units on screen, so it's safe to say you will get a rather large cap.
5) Again Darvin was right on the ball with his suggestion. Art assets however are not "finished" and we are actually planning on redoing/polishing a lot of the units before release.