A lot of very good suggestions have come from this thread, I'll summarize it all up for you now. Having made these changes the game is playing magnificently; the changes I've made have literally made what was once a disappointing game into the best NBA simulator ever- by far. So here are the changes you need to make.
1) Play on Pro difficulty. Allstar is unbearably cheesy at some points, but Pro mode is pretty much perfect with the following changes.
2) Select the gamestyle to Simulator and then make these adjustments...
2) Reduce the CPU's Offensive Awareness to 20 and their Defensive Awareness also to 20.
3) Reduce the CPU's On-Ball Defense to 40, and increase the USER's to 60.
4) Reduce the CPU's Offensive and Defensive Rebounding to 40 and increase the user's to 65.
5) Reduce the CPU's Hands to 39.
5) Reduce the CPU's Play Passing Lanes to 39.
6) Reduce the USER's 3 point shooting to 49. Keep the CPU's at 50.
7) Reduce the USER's medium shooting to 49. Keep the CPU's at 50.
8) Increase the Fouls tendencies for both CPU and USER- this is subjective to your preference, but the Simulator standard settings for fouls are definitely too low.
9) Increase the USER's passing to 55.
10) Lastly, a gamplay tip is you need to REALLY learn the post game this year. 2k12 has given us an incredible post game this year, so practice your post game and learn a handful of the moves. With a good post player you can dominate and get easy buckets and fouls.
11) One more bit of advice, go easy with the Y button (Block) this year (Triangle for ps3). Try to use Hands Up when playing defence. In the post you will give away a ton of fouls if you abuse the Y button. Simply being up close with the guy you're guarding is enough to distract him in the post, so that way you'll not give away fouls and they'll more than likely miss the shot.
I'm pretty sure that's all the changes that are needed. I know it seems like these settings are highly geared towards weakening the CPU, but for 2k12 these changes are necessary. Now that I've made these changes the game is playing so much better. I still lose games against good teams, and I tend to beat teams that I should be beating. The game now plays smoothly and realistically. You will be punished for slacking and rewarded for playing intelligently.

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