Aegis: Yeah, but that would require every mod team cooperating to make sure that the modeldb file had EVERY unit, and nobody was using the same name twice...

Either that or trusting the user to install the lines into their DB file manually... and hell... us modders can barely handle that... are you going to trust a user to do it?
On the first, that shouldn't be hard. Use of prefixes/IDs eliminate the duplicate name issue, and keeping an up-to-date version available for download for modders should work pretty well.

Nonetheless, my prefered solution would still be having the installer automatically modify the file, or at least offering good instructions for how to modify the file with copy/paste of whatever lines are needed (though just including a new database file and tell people to manually switch between them if they want another mod is perfectly fine with me). I have little patience for people who can't read and follow instructions, so I'm not overly concerned about any problems with the latter method.

I don't know where its gone wrong, I edited some sword and bucklar men to look like some highland clansmen. The game loads up fine, so theres no unit_model.modeldb error, the textures are all there, but somethings amiss, even sprites dont show!
Missing textures in the database won't generate errors to my knowledge, it'll simply not apply textures to your models. I'm not sure, but I would guess the reason you're seeing the models at all is because of gloss maps being applied regardless of factions.

Why no texture is being applied in your case depends on how and what you "edited". If you create a new unit, and use a standard soldier, only textures for the default ownership are defined. An armoured swordsman, for example, belongs to only England and slaves. Making a French armoured swordsman would produce a unit like what you're seeing, because no French texture exist (and thus isn't applied) for a French version of that soldier (assuming that the French doesn't use the armoured swordsman soldier for some other unit). I'm not 100% sure, but I believe the same goes for sprites, so you'll see none of those either.