Ireally like the option of moving units to the edge of the battle in order to retreat. No additional losses need to be added, if you can get the units to the "leave the battle" boundary, then they escaped.
I would REALLY like to see this also use surrounding terrain tiles. For instance, Player A has an army on a tile, and to the North is impassible mountains, to the West and East are plains, and to the south is the attacking army of Player B.
Player B moves onto the same tile as Player A's army. The tacitcal battle should have Player A's army in the northern portion and in formation towards the south. Vice versa for Player B's army. Player A CANNOT retreat north due to the impassable mountains - the only escape options are East, West, and South thru Player B's army.
If he splits and goes both East and West, then the army is now divided into two stacks. If he moves the entire force either East or West, the units that are closer to that will likely escape without a lot of loss. But the units that have to cross most of the battlefield perpindicular to the attacking force are going to take pretty heavy losses. And of course South thru the attacking army would be devastating.
This would also make it so you could corner an army with multiple armies. Fleeing in a direction with another army in it would take you from one battlefield to another. Technically the second army would not even have to belong to Player B, it could be Player C's army that Player B "pins" Player A's army with. Of course, if C and A are allies, then A could retreat to the tile occupied by C.
If you managed to chase an army onto a peninsula with no escape on three sides, it would force them to make a last stand as the only exit is on the other side of the attacking army. I think this is a good method of handling retreat because you can make not just the square that the fight is occuring on, but surrounding map tiles matter.