Retraining the General's unit can of course a pretty good idea as well... Unless you want to have a unit with small staff, so that you won't be tempted to throw them into the melée along with the rest of the forces.

Retraining is useful when you want to keep your armies neat and tidy, a force of extremely organized warfare. Merging new units with partially defeated but experienced forces already boosts the newcomers' morale. If you have 20 experienced men left in your unit, once retrained, the unit will still have a slight morale bonus. It's a bit fiddly, but not too fiddly if you keep the number of your troops manageable. Of course the usefulness is questionable if you have Monster Academies (a.k.a. church-type buildings).

Upping units to monsters is, well, not necessary. Usually you can win with good quality troops, but there's another consideration: fun. Many MTW players I know are "collectors", they try to get unique units or those units that are available only in single provinces. Not because they need them, but because they're fun.

I once made monstrous Swedish Handgunners with maxed statistics. Because I needed them? Hardly. Because they were fun? Definitely. Attack 5, Defence 7, Morale 8 or so, plus their handy hand artillery. Couple with a few Peasants of Dread (attack 2, defence 0, morale 2) that you can use to tie enemy infantry and not care about casualties... Super effective? Maybe not. But fun. And they get the job done.

Of course there are some bad ideas, like trying to make Cataphract Camels... Or is it?