A potential change for LH (and backported to FE?):
I like that initiative is penalized by medium and high encumbrance. However, -2 and -4 initiative mean very different things when a unit's total initiative can vary from the teens to 30+!
I'd actually love to see a sliding scale:
0% encumbrance -> 100% initiative
100% encumbrance -> 50% initiative
... with all integers in between. Actually, the last number may need to be tweaked for balance, but you get the idea.
In fact, I'd love to see encumbrance affect dodge and maybe even movement in the same way! This makes strength and mounts important for armored knights, and encourages other kinds of units to travel light.
Of course, this adds more importance to mounts, and I saw the other thread concerning the over-prevalence of mounts... it may also require some re-balancing of armors/heavy weapons.