I haven't played RFB in ...oh 3 years. To be honest even though I use TMO, I have tweaked it so much and with other mods I use of my own it's much different. However, I recall the AI being so easy I switched to TMO.
After playing TMO a year or so, it became too easy. It's not about being a great player, but with any game, once you learn how the AI responds, you can easily defeat it. I never had a problem dying with RFB, but found the escorts in TMO deadly droppers if you didn't evade properly, moreso later war.

If you guys are saying you have to see or hear a ship sink in RFB to get credit, I don't recall that. I recall longer sinking times, sometimes a day, but I always got credit for what I regardless if I saw it. To my knowledge no one has been able to mod that effect as it's been discussed numerous times. Confirm it and I may have to look into the files again as I would like that effect myself.

Visuals suck with both mods to the extent your crew can't see what you can. I agree your crew should be able to see smoke on the horizon, but smoke isn't a hard object that can be spotted. One issue I had with TMO is that the Japs visual AI was as good or better than my crew and with longer gun range, they can spot and shoot you from 5-6nms' away. Also you env. mod or settings have great impact on sensor values. I use my own env. mod and constantly tweaking sensors to env to find a better balance. I've got my crew spotting fairly good, least they get visual before the japs do, about 10 nm's on a clear day.

I've been trying not to use the stutter trick but unfortunately its not something i had a say in this evening. I was doing hydrophone sweeps every hour then i saw the famous stutter at 1024 TC and as expected, there was a sound contact. Then started the game of cat and mouse which lasted at least an hour (my time) and ended up hitting her with 2 torpedoes on the port side.

I also learned the hard way that my watch crew is blind as well :(

You are right, the game tells you ship sunk and accounts for it even if you do not know if you sunk it. But, since this is unrealistic and allows you to put the fish in the water and go deep, i force myself to be in PD until i see that is badly damge or hit. If you ply it that way you are much more exposed because once you are spotted you better go deep, which you can not do if you have to get credit for the sinking. That makes the game harder. I agree that RFB ASW AI is not very good, but on the other side, then you can play TMO and just attack lonely mrechants to not be at any risk. That encourages even more to forget about TF and convoys and just sink lonely merchants since the risk-regard is not worth it. I have not been able to succesfully use TDC and PK to hit 2 ships in a convoy yet in sh4 (playing wiht everything off, no ext cam, no map contacs, and everything esle). So i do not see much point in attacking a convoy to sink 1 ship in TMO versus attacking a lonlely merchant. That assuming you want to survive the whole war which is my actual goal. But yes, i am starting to find ASW in RFB a little to easy, but at the same time that allows me to take more risks against TFs and convoys.

I will change to TMO eventually, i have played already some patrols, but i think the balance would be something in between the 2.

SH 3/4 were designed with the philisophy that it should reward players for making an extra effort, so the player will spot ships before the AI does. However, it is easy to tweak the visual settings so your crew will spot smoke on the horizon before you do. I seem to recall there was a discussion about this in one of the RFB threads.

Having played both RFB and TMO extensively, the difference in the sensors and AI is one of degree. Both are "realistic" within the limitations of the game.

The enemy AI in SH3/4 is like an on/off switch, either it does not "see" you and ignores you or it "sees" you and tries to kill you. Ducimus had a thread on the "uber AI" which explains this very well.

It is very easy to tweak the enemy AI so it will kill you with extreme efficiency every time. TMO's "Bungo Pete" gives you a taste of that. However, that is not very realistic or "fun" over the long term. Therefore the trick is to tweak the AI so it sorts of behave in a realistic human fashion.