If the steps are too small, units will never rout. Also, increasing the complexity of the morale system won't necessarily make it work better. If you can't balance a simple system, you won't balance a complex one.

The present morale system seems to work reasonably well. In vi you have mostly a game of position at 5k, a balance between position and attrition at around 8.5k (+2 morale) and mostly a game of attrition at 15k (+4 morale). Although some of the morale penalties in mtw/vi are different from stw/mi, it's interesting that mtw v1.0 at 10k (v2 = +4 morale), mtw v1.1 at 15k (v2 = +4 morale) and vi at 8.5k (v1 with the +2 of vi = +4 morale) are all the same morale level as stw at 5k where the units were purchased at honor 2 (h2 = +4 morale). Due to the ability to field 16 monks at 5k in stw by selling back honor, it seemed to me that purchasing units at v0 in mtw would be an improvement. However, this upset the morale system because +4 morale points were not put on the units and playing at higher florins was required to get the points back. So, nothing was really gained by purchasing units at v0, and the game was apparently balanced at this lower morale level.