This pretty much mirrors what the situation was with RTW in terms of collision. The units there were 2D, and had no awareness of how high up they were. They reacted to walls in the same was as ground troops, and could only walk through open gates.

Combat animations were triggered when the units ran into each other, and whichever animation routines were normal for the unit would being.

I am not sure how M2TW would react if you fired arrows at a model translated up that way .... but if it uses the bounding sphere for that, then it may not actually be possible to hit the airborne unit at all... I suspect the bounding sphere has not gone 'up' with the model! Whilst the game may be able to cope with hills .... I think only the terrain is used to modify the height of the unit.