All of this is down to errors in the clipping and pathfinding aspects of the game engine. This is a common thing in 3D games where the 3D models have to navigate obstacles, well any games in fact. The unit you've mentioned is probably actually fighting, though it's visible animation has become pushed out of place. If he was on open terrain you probably wouldn't have seen it, though among buildings/obstacls or within a city displacement is common because the units go out of formation in order to navigate the narrow areas. What I can't work out is why the boundaries had to be the actual buildings themselves. This just helps the units to get stuck and causes them to be visible through walls. Placing invisible clip fields with non square corners slightly out from the walls and making the streets inside the towns a little wider (this always helps the AI also) would have helped a lot.
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