I have read that the "tough" difficulty setting is maximum AI capability with no cheats, but when I set the difficulty to tough and look at the AI personality settings, it sais their "natural abilities" get a +50% bonus.

This is the racial bonuses that you buy when you create/modify your race, right (like +X percent to production, research, economy, etc.)? Am I misunderstanding this, or does using the "tough" setting essentially make the AI races a lot stronger than my race?