This is your opinion, but the question isn't "What do you think the best way to train troops should be?"
My personal favorite way to train troops is to autoresolve against bandits rather than looters. Arrange the roster with the highest level characters at the top. Unlike fighting against looters, you will lose some troops, but you will gain more xp, and you can take tier 5 troops as prisoner, as well as getting loot rewards.
A good way to do this is to just sit outside a bandit camp. Most bandits will run from you, but sometimes they get a command to come back to the hideout, and in that case they will attack you regardless of relative strength. If you have some top tier troops at the head of your roster and you outnumber them well enough, there's a pretty high chance of taking no or minimal losses.
The fact that looters can't kill you is really a code oversight and there's a possibility it might be fixed. When the battle simulation takes place it just looks at the first equipment set of a given unit type. For looters the first equipment set uses a blunt weapon. Blunt weapons will never kill a target. Because of this looters can't kill when you auto resolve. If you go into normal combat, bandits will spawn with various weapons, and most of them can kill your troops. The ones with blunt weapons still can't kill anyone, but most of them have axes or pitchforks or sickles etc. It just happens that the first one in the list is a hammer, so every looter when you autoresolve uses a hammer, so they can never kill you.
I modded my game to correct this, and leveling against bandits is more rewarding, still better than actually fighting because of the speed and the fact that experience is multiplied by 8 in simulations. I think I might make a module that redoes the whole simulation, but with daily patches I'll probably wait a bit and see what happens first.
But even unmodified I prefer fighting bandits because they're easier to find, if you stack your party properly you can avoid heavy losses, they contribute high level troops as prisoners, and they provide more loot.