Every command star increases the morale to the units close to the general. However it is unrealistic to have 16 year olds with 3 command stars not to add gain a command star every two battles like in Vanilla. So in order to gain morale bonuses you can train your FM's ( in settlements with schools, academies etc.) were they can increase their retinue with armoure's orators and the such or switch retinue between various FMs. Also spending too much time in the field can give them traits like strong language ,foul mouthed etc.
Finally, yes, more morale means the troops do not break. You can have a crash test on some 8 star generals near the Alps.
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