Here's the issue:
While in the lobby, the host cannot change that Demigods assigned to the AI players. If Demigods have already been assigned by the host, he cannot use the change character option to change them, but must first kick the bots and then assign new characters. In other words, an option that should work (Demigod change) does not appear to work for AI players who have already been assigned a Demigod. This does not seem to be an issue for human players.
Additional report exists. Sheesh, you guys are on top of everything.