Hmm, some nice points there.
The flaw in reasoning is this: If they can't see you, you can't see them. So simply being on higher terrain - serving as an LoS blocker - works both ways.
Right, and the same goes for lower terrain. Sitting in a foxhole will hide you from people at ground level.
The key here is that blocking the LOS of enemies shooting up is much easier than blocking the LOS of enemies shooting downwards. If two archers were shooting at each other, one from on top of a tall building, the other from the ground. The archer up top could simply take a step backwards and sit down to be safe from all direct fire missiles. Assuming flat ground and no other objects around besides the building, the man on the ground is completetly exposed and has nowhere to hide. The only different between the two is thier relative elevations, yet the man standing higher up has a significant advantage.
I'd also nit-pick a bit about missle range. It's true that arrows or what-not may fly farther if you're shooting from a height. But that consideration neglects the concept of 'effective range'.
Even if you both sides are armed with identical weapons, the side with an elevation bonus will have a much longer maximum range. This means that they can begin to shoot (and hit) at ranges where the enemy is not capable of firing back. How much of this effective range bonus you can use depends entirely on the skill of your archers, but this is an advantage by any measure.
An arrow (for example) in free-fall after being shot from the top of Mt. Everest may not be carrying as much energy as required to be effective against it's target.
That depends, whether or not a projectile will recieve a damage bonus from elevation is decided by the speed at which the projectile is launched. An object launched at a speed below its terminal velocity will accelerate up to that limit. An object launched at a higher speed than its terminal velocity will eventually slow down to its maximum, at a rate determined by its level of aerodynamic drag. In ballistic terms, elevation equates to "free" potential energy. Harnessing that energy is just a matter of designing your weapons properly.
So I'd ask: How much farther would you add to a unit's effective range based on elevation differences? How much would you subtract from the unit's effective range if firing from a lower elevation?
This depends entirely on the ballistic arc of whatever missile your units are firing. Arrows fired in high arcs will not recieve as much of a benefit from elevation as crossbow bolts fired in short wide arcs. But then direct fire weapons like the crossbow are far less effective at engaging higher targets.
Extending range based upon elevation factors should also take into consideration the concept of 'aiming'. I've shot in archery tournements and can serve as witness that hitting my mark at 90 meters was an exercise that involved The Force or something
Damn right. At my local archery range the target faces are wooden frames about 7 feet tall and 5 wide. The biggest tournament standard bullseye target is about 4x4 feet. I'm not that good, but I once tried to shoot at 90 meters just for fun. Out of 18 arrows I managed to get one hit on the frame... of the next target over. The rest of my arrows landed in a big 40 foot wide cluster.
Ranged warfare on the army scale is all about firing big thick clouds of arrows at the enemy. These are none too accurate, the emphasis is placed on rate of fire rather than individual accuracy. But when the enemy soldiers are packed into tight formations of 100 soldiers or more hits are almost guaranteed. If you zoom down to the squad level of 20 archers or less, then the focus changes to accuracy because every shot counts for more.