I think the hard mode should be reworked. Loosing skill points upon being knocked unconsious is rather frustrating than challenging. If you want to punish players for falling in battle there is a better way of doing that - like removing experience gained through that battle or making the character unable to use weapons effectively for the next x hours (on the world map) after being knocked unconsious.
I also have an idea to prevent retreating from battles (I don't do it myself but many people abuse that mechanic). I'm not sure if battle buffs (increased damage or hp) could work on warband engine, but here is what I came up with: generally speaking, each enemy killed or knocked unconsious during the battle increases damage and hp of his allies for the next "round" by x% (2 - 3% would be resonable). Player could only get rid of that stacking buff by finishing the battle, no matter if its won or lost. If that's not possible, retreating could simply... cancel progres of the battle. I think one of those solutions could be implemented to hard mode.
I also have an idea to prevent retreating from battles (I don't do it myself but many people abuse that mechanic). I'm not sure if battle buffs (increased damage or hp) could work on warband engine, but here is what I came up with: generally speaking, each enemy killed or knocked unconsious during the battle increases damage and hp of his allies for the next "round" by x% (2 - 3% would be resonable). Player could only get rid of that stacking buff by finishing the battle, no matter if its won or lost. If that's not possible, retreating could simply... cancel progres of the battle. I think one of those solutions could be implemented to hard mode.