Yes they can pick arch types (though not sure about governor never looked for it).

You can teach them spells if you find/buy the books.

They can use equipment just like a hero.

They can die but since they level up just and can be equipped just like heroes it's very easy to make them pretty much unkillable.

Someone else on this board (can't remember who off the top of my head) posted a strat where he rushed the early magical weapons and equipped the henchmen with the Lightning Hammer (9 damage +1lightning per level) and it really packs a punch as they level up.

The henchmen are the main part of Tuidjy's Quest Loop: probably the most OP tactics I've ever tried.

Basically, it consists in designing henchmen with Shieldwall (+3 army defense), Bard (+10% army XP) and Potential (+20% unit XP), and the lightining hammer. Then, train a bunch, join them to your sov, and then make a lot of Quests Maps to level them. The more bards in the army, the faster they level. If you give them Tutelage, they will level up even faster.

After some quests, they are so overpowered in level (many HP), in damage (because the hammer) and in defense (because the stacked shieldwall), that all AIs will start giving you peace and economic pacts. A pure stack of doom. You don't need to give them any item, but maybe spider poison sacks when you have some hundreds of them, after many quests...

Now, with 1.1, QuestMaps take 100 gildar instead of 50, so you will probably need a bit more of micro. Before 1.1, I could make 2 quests per turn.

Try it at your own risk.

By the way, making some henchmen to go Governor is a good idea, as they will give growth to cities, and helping in decrease the unrest of conquered cities.

No, they can't.

Curious if the change to heroic influence and increased cost of quest map makes it terribly cumbersome to do the quest loop.

And personally, again, not everything needs to be balanced.  Yes the quest loop was wildly overpowered, but its also pretty boring.  It was fun the first time, but then the process really lost its appeal.

Good point on the equipment though - I don't think a newly created henchmen should actually get the tradeable items if that is possible.  If I have a jacked production town it seems like i would be able to get the items possibly much cheaper than via the shop.   May still be small scale - even if you're churning out 1 per turn, how many worthwhile items are  you really going to get?  And re-sellability is a factor, but how big is it really going to be? 

Re henchmen and tradeable items, horses weren't tradeable/sellable when I created henchmen with them. Chainmail armor was, as was the lightning hammer. And Henchmen who start with the impulsive ability (from the Fortress upgrade) are pretty impressive when equipped with Lightning Hammers.

Wow, henchmen get nasty.  It took me three playthroughs to realize that they existed, then I went nuts.  Had a Yithril game where I had the sov, 4 henchmen and 4 jugs in an army.  The sov was Guardian, two henchmen were Guardian, and two were Warrior.  OMFG.  I had so much stacked +initiative, +spell resistance, +xp, +dodge, +attack, +accuracy it was crazy.  Plus, they were all in the 20s, with lightning hammers.  Anything that the henchmen didn't obliterate, the jugs would finish.

He probably had Yithril scions.  If you can get the influence, scions are no worse than henchmen.  That's how I actually came to think of the quest loop.

Karavox had Lord Relias running a quest map store in the Altar reservation and was pumping scions from a level 4 fortress.  When I saw how powerful it was, I just decided to try it with Altar in the first place, and... we all know the results, I guess.

I fucked some shit up with Scions in one game, but I don't think I had more than 5 in the game, and they can die.  And you can't give them hero equipment.  

Some notes:

Henchmens are heroes who don't split exp (they are treated like any other champions - custom equips, gains injuries, can't die).

Scions are units who gains traits (they are treated like units - no custom equips, half exp, dies permanently). Scions also don't get access to henchmen specific traits (bard/customshieldwall).

Dark Wizard's Cloak of Fear isn't an auto cast, it's just an ability he uses on his first turn. If you have an impulsive units, you can slaughter him like a joke before his shield is ever up. Something with init higher than him works just as well.

PS: Try using a bunch of Defender Henchmens with stun. Completely rapes EVERYTHING that isn't immune to magic.