Artificial intelligence in PvE

In a land before time, or so the story tells, MMORPG developers decided  they will make the wrongs right, and give mobs brains - artificial intelligence. How cool would it be they said, if our mobs were smart, if they would be a real challenge, and while we are at it, let them gain experience and ding levels.

There best programmers worked weeks, day and night on the task. And after a while it was ready. All the inner tests showed remarkable success, the mobs were indeed a challenge, and behaved wonderfully. Bottles of champagne were opened and lavished upon the game designers who came up with such brilliant and unique idea.

Not a long later, the game was released and brave new adventurers came to check what the fuss was all about.
Quick skip to a week later - the mobs in the starting zone doubled there original level, roaming around one-shotting new players and camping spawn points.

If there is any truth to this story I know not, but that there is a fear among game designers of the words "smart mobs" - I am certain.
Take for example WoW's 4 year old Ragnaros and compare him with the latest of PvE boss design - Kil'jaeden. What has changed?
Several more phases at specific %, half a dozen more abilities to remember and watch out for, more dangerous and important adds but the core is the same -- a scripted encounter, a well defined set of rules to play by.

Find an original answer to any of the following questions:

1. Can we create a system not based on threat, but where players are not getting one shotted?
2. Can we give AI to a Boss that will not use it to go around killing healers or change his texture to match the cave's wall and hide?
3. We can use evolutionary programming to create bosses from scratch with there own developed abilities, but will it be interesting to players?

Or simply put - can we create a more fun and challenging system then the current scripted encounters with X phases Y abilities and Z adds?

Not that there is anything wrong with it.