This has been a concern of mine, too. I mean, sure, being able to customize your units with weapons and armor is nice, but eventually won't it just become everyone-has-the-highest-upgraded-items. The various sides should be different, because it doesn't matter how many factions there are, if it's me facing a dozen me's, it's just me. No variety.
Seeing new cavalry - nay, other units - based on location would be a great way to not only make you want to try and achieve new locations (or play from new regions) but it will allow some new strategies and spells to be created. Living in a forest, your channeler may charm a few dozen wolves, then place enchantments to increase their size and strength. Congratulations, you now have wolf riders. Add in worgs/wargs, bears, hippos (near watery areas) and each kingdom can gain its own special units based solely on its location.
Granted, having one unit isn't going to be much fun (Yup, they've got 10k soldiers, all of whom are identical to my own. But those two hundred wolf riders? This'll be interesting...) so perhaps tossing in various other units (living in a forest, your troops may gain a bonus to axe-fighting. On a mountain? Increased health. On the sea? Defense, from fighting off pirates or something.)
As to what GW Swicord said, I agree wholeheartedly. It could add a massive degree of planning and strategy. If you live in a moist marsh with unsure footing, your troops may learn to navigate it just by living there. But enemy troops? Who can say if they'll get lost. Perhaps a spell that would normally call a rainstorm over a location and give increased crop production could be cast on an enemy army and slow their movement, maybe even break supply trains and whatnot. Even the simplest spells wielded properly could be devastating, but there's the whole 'wielded properly' bit.