That's how it worked in the Pocket Mod. I basically made armourers as pre-requisite buildings, like the spearmaker, bowyer and swordsmith. The only thing that I left intact was the valour bonus for the Master level building. I then simply used it as a dependency for armoured units.
I renamed the metalsmith as the blacksmith and made it the pre-requisite building for all cavalry, peasant type units and axe units.
Oh but it does... the lowest quality peasant thug militia are the best for this type of work... On the whole I'd say that this works better than it does in RTW, where garrison size is proportional to the population size and once the population gets to a certain level large garrisons don't help much.
My memory fails me on this. I think it's only in the sand desert and rock desert terrain types that the armour penalty comes into play though.
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