There is a way to bypass this; and that was Caravel's idea and intention that we were discussing together, and from those discussions i went on to make the Caravel mod (we were meant to have made the mod together and it would have been much more radical and from the ground up than what it is).
Caravel suggested that all units from Keep (level 2 castle) level onwards be elite. This is easy to do, and it doesn't show up in the unit card info: you just say YES in the comumn of the unit prod file that asks if the unit is Samurai. This is a carry over from STW of course that shares the core engine with MTW. In STW, Caravel said, only the Ashigaru spears (Yari Ashigaru) and the Ashigaru gunners (arqs and musketeers) are not Samurai and hence get hefty negative bonuses from the death of the General as they are peasants.
In MTW, very few units are designated Samurai, elites in MTW terminology. Hence why armies melt down at general's death.
I have not incorporated Caravel's idea into the mod because i wanted it to be vanilla-like gameplay - i wanted the General to matter, and i wanted most armies/units to be fragile to the general's death. Also some other features of the vanilla game apart from the battles would get affected. For example, the Military Academy that makes units disciplined would become more or less redundant - being elites is better, and if most units are elites, becoming disciplined would mean little. Equally redundant would be the property of disciplined of all those units that are such in their basic stats - Byzantine Infantry, Mamelukes etc etc. So, ileft it as is.
However, there is nothing from stopping you to do it thus in your own mods. Set the majority of units to elite, say from Keep level and above, and the problem you are having with armies melting at the death of the General will be solved.
I'll post what i did with the BG behaviour; its a small setting, but i played from last night about 20+ battles in custom and campaign and it does make a difference. I'll explain once the new version is out.
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