I agree! But what if it's an intended tactic of your unit to "hit and run" that unit should have to have a special item? And stats should balance out by using said item... ???

Yeah, in fact, it was a special trait in HoMM if a unit prevented any retaliation. Otherwise, you took a hit after giving one in Melee and I think in range if you attacked a ranged target (i.e. an archer attacking another ranged unit)

Arg..update needs to hurry up and download (i only just started the DL), because i fear i'm at risk of looking like an idiot talking here...so feel free to ignore me if this is wrong:P

From reading it sounds like by using a combat point to attack, you move foward AND attack, effectively giving you 2 actions instead of 1).  Perhaps movement could be better tied (read balanced) into it's effect on your combat speed usage, or better yet, simply make movement a once a turn thing, aka:
you move 
move then attack
attack then move

This means you could still perform hit and runs, but over the course of 2 turns, giving the opponent a chance to react.  And also fitting in with with the fact a lvl 1 sov could not win against a much more powerful but slower unit without using spells or a small army (read meat shield:P)

I do like the idea however as something a higher level sov or special monster/unit can do and since we're going to be getting more character traits at some point, it might be worth mentioning a DnD feat in relation to having an item that allows such tactics.  'Shots on the run' (dnd v3.5) was a specific feat that allows splitting your move before and after an attack in a turn.  Having that as a costly trait would be quiet nice, making it understandable why a sov can weave in and out of combat before anyone can react (assuming he can still move far enough away that the dragon doesn't decide it's easier to roast him before chewing than the other way around )

I think one of the best ways to solve this problem is to do what MoM did. Which is when you attack the enemy gets a retaliation attack. This way there was a chance you could actually die from attacking someone it wasn't simply a free hit. There was still reasons to Kite in MoM such as if you had healers you knew you could outlast them rather then trading all your blows each round.

I don't know what to make of these retaliation attack comments.  In my 3B games so far, enemy units have always damaged me (or attempted to damage me) when I attack.

I agree - units need to counter attack. You could say that they counter with only 'half' of their usual power - but then some units (like wolves) get a 'full' counter attack that has max potential for damage.

I don't remember getting counter attacked, just attacked when it's their turn. I remember waiting one square away with my 2.0 moves sovereign, the enemy moves to me, me attacking, then moving 1 square away. I never took a counter attack and they never could attack me because they used their action to get into melee range.

I think what might would solve it is that attacks are "free" (i.e. no action points lost), but you only get one per turn (or maybe scale it so you gain your next attack at 2^(num_current_attacks)

1 current attack = next at 2^1 or 2 combat speed

2 current attacks = next at 2^2 or 4 combat speed

3 current attacks = next at 2^3 or 8 combat speed

...etc