First, the AI shouldn't be looking for sneaked players just because they've sneaked.
Obviously not just because they sneaked (assuming other targets). But there's plenty of reasons the AI would pop a sneaked opponent out of stealth. One being the character sneaked to avoid dying, and the AI can finish him off if found.
the best procedure for finding a sneak is as simple as walking in a small circle.
I don't know. This doesn't detect ranged sneak attacks. Nor players with high mobility who can run in and out of the range, or those willing to switch between spell and sword attacks.
If players can duck in and out of this small circle, they will, and if you say they can't, then what's the point, the AI will detect 100% of the time.
To keep stealth a powerful tool for getting out of combat, without trivializing content, I think it just needs a cooldown. When you break stealth, opponents get a round or two of attacks, before re-stealthing.
