Are you playing on VH battle difficulty? Don't be surprised in that case.

It's completely ridiculous. CA decided that a simple way to make battles more difficult and wich didn't require them to do much effort was to imbue the AI units with massive attack bonuses. An AI unit of peasant spearmen can and will defeat your own most elite units in melee.

I'm glad MTW2 doesn't follow this approach, or so I've read.

As for phalanx units on walls, generally they do rather poorly. There are some phalanx units with decent secondary attacks but they're still not at their best. The easiest way to defend your cities is to let the enemy take the walls and position your phalanxes in the streets. It's arguably an exploit because the AI can't cope with this tactic, allthough I did lose a couple of times when I was seriously outnumbered.