When I see a band of river bandits defeat a group of manhunters I would expect at least one river bandit to get enough experience to level up to bandit. The AI battles that take place (and the battles that the player looses) should include experience for the AI troops. Peasants could become militiamen/footmen/watchmen, the militia could become skirmishers or vetrans, and so on. It may already do this, but I haven't seen it happen.
mfberg
mfberg