I use normal fire mode when i am trying to eliminate most of the unit to make it an easier target for my cavalry to decimate with a charge to the rear. However, if i am in a pitched infantry battle, or if my cavalry get bogged down, I use fire arrows to hopefully cause them to rout under the strain of the attack and the hellfire that is falling on their heads.

From my experiences, I have found that fire arrows do not cause a unit to get demoralized unless the unit is already in combat with another unit. I have found it best to use regular fire mode until the lines engage, then switch ro fire arrows.

Unless I am fighting elephants in which case I just use fire arrows to make them rout.