Which is how battles have been won since ancient times up to ww1. You break the enemy at one point and he either fills the gap or breaks apart completely.
Similar morale systems have been used in mods before, that Napoleonic mod for RTW comes to mind. It worked very well. Low casualties and low morale turn the game into a tactical feast where holding the line becomes priority n1, the overall juxtaposition of the units having more of an effect than the individual stats.
The only argument against this would be the dumber-than-dirt A.I. (a mindless slaughter-fest being more suitable to its abilities). But I don't see how one could get any pleasure from dealing with the A.I. in the first place, so I'm not going to get into that discussion.
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