Hehe ... yea, Combat mechanics/ heroes vs armies is COMPLETELY DIFFERENT!!
... but as to this topic ...
there *should* be AI directives for heroes/champions. They should have alignment motivations, greed motivations, and safety/security motivations.
Champions of similar or near-similar alignment should *readily* form alliances (parties) if greed or safety motivations overlap.
Also, if the greed or safety motivations are EXTREME enough, opposite alignment champions could make temporary alliances (until they find more suitable team-mates).
Also, perhaps some crowding mechanism for parties/champion alliances ... so that groups of individuals don't get too large, cause ultimately beyond a certain point headstrong personalities will cause a large group to split. (at least in fiction)
Since Champions have a high likelihood of retreating, Champions that have fought against each other would be less likely to form alliances in the future.
Also, Champions would be less likely to hire themselves out to a Faction that employed their rivals. (unless it was the Richest faction around that paid well and gave good benefits, etc)
I think there should be three levels of NPC interaction. Full Independence, Contractual Obligation, and Full Membership.
Full Membership would be "hiring them" and they become full citizens, members of the royal court, the works. You fully control them.
// Edit: Full Members with low loyalty have a chance to rebel. The thing is, if a FULL MEMBER rebels, they may end up swaying a good portion of your military and family members to their cause ... with the potential to start a civil war. Heck, its possible even an entire CITY may join their little revolution. Therefore, its important to have Full Members with high loyalty.
Contractual Obligation would mean that they are relatively automated, you can assign soldiers to them, and you can pay them bonuses for good deeds. Contract-Heroes with low Honor may rebel, flip sides, or go rogue unless you pay them well enough.
Benefits to Contractual Obligation would be that while you can "order them around" (loosely, not directly), you are not diplomatically responsible for their actions ... so they can act as independent agents without a banner. /// people can choose an alternative implementation, this is just one idea ... in the end though, its basically a Majesty scenario, where you give them incentives to do tasks for you. /// I'm all ears for suggestions on how to make the middle choice actually worth it.
/// Edit: Further Benefits to Contractual Obligation. The longer they are under contract, their loyalty to you slowly increases. It may be wise to increase a Champion's loyalty in this manner before making them a full member.
Full Independence. -> Free agents, likely to form parties/temp.alliances with other free agents. Sometimes a party of free agents may become extremely loyal to each other and never separate. If they live long enough, of course.