It happened ,but the army that was protecting the town left days before the enemy could arrive not when the enemy was 20 miles close.
Keep the scale of the TW game in mind, 1 turn = six months (at least for RTW, I´m not sure what´s up with the new time model for MTW 2), one campmap square = ??? square miles.

As for your points:
1) yes, your faction leader can escape, but you lose the city. There´s a limit how often you can retreat, obviously. I´ll not mention that it worked pretty well in MTW I.

2) I don´t see why not. Either the AI is weak, then they´ll retreat and abandon the city. Or they´ll give battle when they´re strng enough and, when they´re defeated they´ll be entrapped in the city. Finally, the AI decides it´s strong enough to hold out in a siege, but not to give battle, then they´ll retreat into the city and wait for external reinforcements. Again, I won´t mention that it worked well with MTW I.