Is this seriously a major issue? Because this happens every game with infantry. Each battle you play against the AI in a campaign, or against people online, has spots at various moments during the battle in which two or more units of infantry or cavalry overlap (that is, a significant portion of the units overlap). There's no way around this. As I said, if you view it as more men as opposed to more "units", it might not seem much of an issue.

I know you can roleplay "units" as companies of men. And I know, the engine can't help itself. It is programmed like any other game in this genre. It needs to treat chunks of men as objects we call "units". An arbitrary term on its own, it is significant in terms of increasing the effects of charge (and the duration, sometimes). It's a bitch to deal with. But what would you rather do? No matter how you decide to have players use their units, I can't see a situation in which two units do not overlap. Have you checked the formations, or tried dragging to form lines containing multiple men? The game was intended to have an overlapping of units.

You will never see people fight battles with individual units spaced apart, as if they were making cookies in the oven. The only time this has happened (especially with units so far as to avoid morale effects) has been when I or others have been working together on statistical experiments to determine the effectiveness of certain units, or matchups.