They could be used for most/all of the lower level stuff AND give another incentive to do content by implementing the gambit system from FFXII. No need for high-level AI on them either at that point. Just give them a basic AI...(so basically don't change anything...) and let the players do the "programing". I mean, we ARE technically their superiors and they ARE part of our squad to learn how to tackle the highly difficult foes that we trounce.

However extreme/savage/ultimate should not be in any way accessible with squads, EXCEPT for training. No experience, no drops, no kill counts. Just have them do the fights properly (including reviving the player if he/she dies) so that the player can actually see WHAT to do and how, removing the random element of humans.