Here's what happens - I start a new game.  My sovereign has no equipment.  I come up on a creature that is strong and the creature attacks.  I get the option to auto-battle or battle.  I choose to battle to run away.  I succeed.  My spell research finishes for flame dart.  I re-engage monster to kill them using magic.  My sovereign automatically enters battle and I die.  No option for tactical battle.  Obviously, I'm thinking the code that decides whether or not to engage in auto-battle needs a pretty big tweak as I'd think you would only want to auto-battle if you have a nice advantage... NOT to just have your sovereign automatically killed. I have replicated this issue twice.  Happens early game around turn 10-20 or so.  If more details are needed, let me know, but for now, this means I can't use my sovereigns spells to level up early, which sucks a bit.  I don't think I've encountered this specific problem before. 

I'm using default settings on build 1.06 released on 08/26/2010 around 11PM EST or so. 

Update - after feedback from a few helpful folks, I figured out what the issue was and was able to resolve it.  I had to go under options and change my tact-battle slider to 0 so that I would always be prompted for auto-battle or battle.  So, its not a bug, but I'd argue pretty strongly that the DEFAULT for this option should be set to 0 and that EXPERIENCED players can just tweak it in options.  Having little experience, I can tell you that having your sovereign die automatically early game sucks and is exceptionally frustrating.  How about a change to the default settings in the next patch SD?  Thanks!