I believe CA have said at some point that generals will be recruitable like any other unit. As such, the way I would like to see it handled, would be every time you recruit a general, you are given a list of candidates for the position. Some would be randomly generated, some would be pre-set famous generals like Marlborough or Napoleon, and in a monarchy some would be younger male members of the royal family.

You might have a choice between promoting a grizzled veteran lieutenant who would lack tactical subtlety but whose men would trust him with their lives, a talented but unproven fresh recruit from the military academy who would have a high command ability but would struggle to gain the confidence of his men, or a political appointee who would be an inferior commander but whose selection would win you favour with parliament or the aristocracy. In times of political unrest, it could also matter whether the man you appoint is a fiery Republican or a staunch Monarchist; the wrong choice could result in mutiny and rebellion.

Certainly I can't see how the current system can remain in place, given that changing to Republic would mean wiping out all your existing generals.