It was quite common throughout history, and even in modern warfare for units or parts of units to retreat while the battle continues. Why? Because in armies the men bond very closely with their immediate unit in many cases, and once you've seen a few of your friends dead on the ground it can be very hard not to panic and run. Once the rest of your unit sees you running, it decreases their morale and if others turn and run it can cascade. This cascade of morale failure can spread throughout the army, or might be localized, it will depend on a lot of factors like a leaders ability to rally those who's courage is failing them.
I would think you could also reason that if you see a friend or two get killed you might get really pissed off and want to get instant revenge with the enemy right there infront of you. And I agree that people fleeing would cause others to flee. Now I wonder if in the code that if some units retreated in a previous round then in the next round they are more likely to. But the cascading thing would support everyone to start to flee at once sorta. I could understand that random individuals would flee from a fight. I just find it weird that there could be four guys on the front line and be like crap our other 16 guys we travel with are dead/wounded, and even though we are surrounded by over 200 other men from our country fighting alongside us we should risk getting killed and run.
Now in terms of units leaving under orders due to low numbers of men left, it depends on how you view battles. In my mind they are similar to what we would associate with Greek or Roman tactics, with the army split into individual units that often have a good few meters distance between them. Once a unit gets down to a certain size, they are less effective in the melee, and yes it can get to the stage where their continued presence would hinder the other surrounding units. If we had a concept of reserve units this is were they would come in, replacing a unit that has become a burden to the others.
I agree again that any sort of fraction of the noble units would make it valid for noble units to flee. The BM battles appear that it is just a giant mosh pit with attackers and defenders merging their armies together. Now with the new unit matching system maybe they are trying to make it so units are split up, but trying to visualize that in a medival setting looks goofy.
Also I had second thought that should improve fluidity to the turn based fighting.
