Ok guys, heres the low down
Vaegirs = Best Archers and foot men (from what I keep battleing them for) but they got the most boring missions and you dont need many men to escort caravans (they pay well)
Swadians = Best Crossbowmen (footmen carry them so you don't have to wait for upgrades) and Caverly (they dont carry as many spears but more swords and axes. They got most exciting missions ( Noblemen capture, Prisoners, Raiders ect)
Inividual = OWNs (i think so anyway) Attack both sides and you will be able to (from what i'v heard about upcoming versions) that there will be a bandit faction (based at Dhorak Keep) and attack anyone you like. Also attack ANY city you like. (don't think i am tellin the truth because i might be wrong sorry)
Now then, if you want the BEST ARMY, hire people from Zendar and upgrade them up to the top (Hired Blade) The get Swadian Knights and Vaegir Marksmen. This is my personal army strategy, and i have only lost once (i'm level 39) Also, if you are EASLY killing enemies on whatever AI level or battle size then heres a one way to make it VERY exciting!!!
Make a new character (if you are not level 30+) and save as CHEATER or something to say its a save file with cheats on, (cheats only work if you bought full game) then use XP,money,upgarde(for you'r army when you have hired people) Make them the ranks i said above. Put the AI to a low level first and the battle size to the max (low AI because it sometimes slows PC down, also because if you charge at an enemy that has 30 or more archers/crossbowmen then you will be looking through a dark tunnel at a bright light ahead of you

now fight some swadians/vaegir war party's. And see if you survive.