Clumping is an issue but it really only severly impacts during sieges but sieges can be 50% or more of the battles so it is a problem but I haven't seen any good solutions. Certain things are limited due to the engine CA built.
As for looser formation and less mass having only a few men fighting- on offense with several units involved that can happen as parts of the formation get tangled up but if on guard mode and the denser formation with greater mass approaches and attacks it will push the lesser mass formation back and eventually most of the formation comes into play. It does take quite alot of balancingto try and get unit to reflect stats and historical function though but my only point with you is that such balancing is not really part of BAI. You can test 1 vs 1 for a long time and then in some battles still get a different result because of clumping but unless EB team comes up with a novel solution there isn't much you can mod to change that part of the engine so that clumping is never an issue. Just reduce severity of its impact.
Some of the better BAI have addressed that a bit but the more aggressive the AI is the more that tends to happen- however the more aggressive AI is usually the one that does the most damage even in clumped formation. The AI does try and straighten its lines out before making contact in most of the modded BAI's I've seen lately but doesn't always succeed. If you could force the AI to move in neat formations that would actually make it easier for the human player to divide and conquer though wouldn't it? I find trying to mess with that giant mass of approaching units is difficult with anything besides ranged units until you commit your forward line. If the AI kept its units nice and separate you can more easily line of charges or draw just 1 unit out etc.
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