We have at least partly discussed the possibility here.  To include vassalization, and other diplomatic options inherant in minor powers dotting the land.  A lot of people also appear to be hoping for a strong RPG (or at least character development) element.

Awesome, I really hope we will be able to use other races in our armies...though I read in one of the interviews that the battles would be 99% human vs. Human. I hope they don't stick with that, and add in alot of other races that can be used in your armies. Maybe this is where the custom races bit they mentioned comes in.

At the same time though, having those units be SOOOO rare (and most likly, irreplaceable) will end up making people too afraid of loosing that unit that they don't use it that much. It would seem like having just one or two extra-ordinary units will make them not that effective in large battles...thats just my opinion.

For dragons it certaily makes since that there should be only a few in the world, but to say trolls are as "rare" as dragons cheapens the value of dragons in my opnion. I don't know, I just think it would be better if you could recruit like a regiment of Lizardmen, or a clan of Minotaurs or something like that. I suppose I am thinking rigidly as I am used to most sentient beast races in most fantasy setting being in groups, and not that much stronger than a humans (with exceptions such as dragons obviously).

I'm not saying you should be able to recuit beasts like you can humans. I still think the units should be rare, just not all single soldiers that don't stand out on the battle field. Have a pack of trolls be a single unit. Sure there are a 10-20 of them, but that doesn't mean finding and recruiting that unit can be done easily or would be common place.

Do mean thats how many soldiers they would be equal to?

Well, the difference between regular knights (heavily armored mounted warriors born and raised in a warrior tradition) and peasants should be huge... but so should the cost, both initially and ongoing.  A knight consumed far greater resources than a peasant on a daily basis.  And if the shock effect of the knight can be blunted, then those peasants are a much better deal in terms of cost.

Personally that is one thing I really want to see.  The situational strengths of strong and expensive units, while its weaknesses are manifest as well (in which case the cheaper units become a better deal).  That way the bulk of each army is made up with relatively inexpensive and numerous units, while elite and powerful units form the core.

Well, take solace in the fact that it hasn't been confirmed either way. A hero creation option would be kinda cool though, even if it comes back to bite you.