The game has a 94% approval rating on Steam, so it's not exactly "bad".
In the original Half-Life, the HECU couldn't fire and move at the same time, so a lot of their time in combat was spent repositioning, which made them seem intelligent and gave the player more time to breath. In BM, they run at the player while firing, so you pretty much have to take them out instantly, which can make the combat flow less satisfying. The team has already re-written the A.I once (since the mod release) and have tweaked the enemy fire cones to make them less frustrating. (In the mod the HECU target you instantly with pinpoint accuracy). They will look at the A.I again once the game is out of EA, but because the encounters are designed for the existing A.I, it's basically too much work to start from scratch. So they will tweak what they can.
As far as Xen goes, the Agrunts have new A.I which is pretty much what the marines should have been, so there is no reason not to play Xen because of A.I concerns.