In the grand scheme of things, I like your idea Tom, and I am in no way advocating that we replace it with this one. We should look at both on their own merits.
That said, I think factoring Terrain into combat in another way would also add to the game. Part of the blob problem is that, as Anaris pointed out, there are really *no* force multipliers when it comes to combat. This greatly encourages the blobbing mentality. Without force multipliers, the determining factor of victory 95% of the time is who is able to bring the biggest army to the field and deploy it in a cohesive (i.e. blob-like) manner. This is why virtually everyone fights in blobs. It is next to impossible for a smaller force to prevail over a larger one assuming the size difference is non-trivial.
If on the other hand region type can lead to bonuses or penalties for specific unit types, it adds an entirely new element of strategy to the mix. No longer will an army with a significant heavy cavalry component instantly prevail over an all-infantry army of equal size. The infantry army can take up positions in a mountain or forest region (for example) and suddenly it's not so clear cut. It adds so many great elements to the strategy, and enables smaller forces positioned to take advantage of terrain bonuses to potentially prevail over larger ones. These are my thoughts anyway.
