So Taleworlds seem bent on making this a pseudo historical game and historically dogs were bred and used for war. However they seldom took up roles in the actual fighting instead being used as guard dogs and early warning systems for an army while they were camped. This isnt to say that no dogs were ever used as an attacking unit there are reports of dogs being sent in to break enemy lines before cavalry were sent in.
In terms of Bannerlord and how I personally think they should be used, I think each faction should use dogs differently, Battanians should use dogs aggressively given their preference for ambush tactics while the Empire, being more focused on formation and even application of force, should be more conservative of their dogs using them as guards. Honestly, to me this just gives Taleworlds a new way to tell us something about each of the factions and lords. Like it would be neat if there were no dialogue telling us someone didnt care about animals where as another lord did by just giving them or restricting them from taking animals in battle