I've noticed a tendancy for the AI to go for newer and 'better' techs when they have the chance. Every time i have gifted techs to the AI, they ask for the most advanced one first and finally ask for the original prereqs. I haven't seen it specifically with literacy, but I have for things like seafaring (1800 AD and no one knows how to build a harbor in a small continent world)
As to your game, I might try and see if someone wants literacy/republic as a gift tech if you want a republic to trade with. Otherwise, I guess you need to decide whether you want the nickel and dime caravan bonuses or whether you want the wonders. I probably would pick certain key wonders and divert a few caravans towards them while sending the rest towards some far away capitol. Obviously several hundred gold per caravan doesn't quite buy what several thousand gold per caravan does, but at least the cities are cheaper to revolt too