I wouldn't be getting rid of the formations...
Certainly in single player, I find square formation to be handy in large battles... You can march your infantry well out in advance of your archers... as enemy infantry attack it, they wrap around the flanks, and expose their backs to your archers. It's nasty business from then on.
As per above, I find circle formation really handy facing off against steppe bandits early game. I tend to go for crossbows in the early game - sharpshooters are handy for the brother quest. Put your crossbows in a circle and it turns them into a 360 degree firing squad - they turn marauders and raiders into dust in no time.
The problem is that the AI doesn't utilise them as well as it could. I understand why ai factions circle up... they just don't do it in a way that denies you freedom of movement in the battle space around them. So even solo, you can ride around their circle taking shots into the backs of the soldiers opposite until their circle breaks up - as opposed to when I do it, there is no safe manoeuvre space around my circle.
For this reason, I would never fight or allow my parties to fight under an ai general.