I have not played the XBLA version, only the PSP version.
The dev has said that the computer does not cheat.
At first, I felt the same way but then I start to play defensively, you gotta plan 1 move ahead of time. I.E. you have to see what the repercussion of each move. I would not do any move that will give the CPU a 4/5 in a row. After that, it was a piece of cake (with the right equipmen, the CPU really has no chance).