World difficulty + influence would like to have a word with you.  They can't spawn inside influence, and as area without influence gets smaller they spawn more heavily. 

I have to agree. I only played one game to fruition, and I spent all of my time running around killing monster so they wouldn't take my resources. No, they don't spawn in your territory, but they spawn right outside of it and march right in. And when you get trolls with 120 attack strength, you can't just throw any unit against it (particularly with the game's poorly designed combat system). Forget about any wars going on. I never heard from the AI - I guess they were having the same problems. I feel like the Orkin man, not like the leader of a great empire. Spawns really need to be cut down.

Yeah - or the ability to design some (like when making a caravan unit, you can design it with "Guards" that up it's HP and defense at the cost of more materials/gildar to recruit the caravan).

Thoughts and suggestions:

1: Spawns serve a purpose as a way to get XP without going into a full-fledged war (which may or may not be tougher.). As such, they are necessary.

2: When you do not want that, there should be a way to suppress it - I'm thinking put an army on patrol and its move radius will be a sort of 'secured' area where monsters can't spawn.

Optionally, make some of the treasure areas places where monsters spawn, and you can choose to let them grow (and possibly increase the value of whaterver item's in it) or cut them down, depending on wether you want that item now or a better one later, and/or want to kill the creatures for XP or remove the threat to caravans.

Lastly, it is not THAT difficult to expand influence to a point where spawns are not a problem.

About tougher caravans: You can't even fight them, the option is automatically 'auto battle' or cancel. TOugher or not, they'll still be automatically killed.

With that said:

How does the new damage calculation work? I notice that it seems like it works something like this:

Squad of 4 archers w. longbows (6 attack) get 24 attack value total. This is 4 attacks of 0-6 damage against individual armor; against 8+ armor or so, damage is rare.

However, and this is the bit I think must be wrong, it seems that as unit figures die, it becomes 3 attacks of 0-8 damage, 2 of 0-12, and finally 1 of 0-24, so, with one figure left it's exactly the same as the change was supposed to fix. I am not SURE it works like that, but it's the only way I can explain that an archer group of 1(of max 3) did 11 damage against a target with 9-ish armor value, while  consistently doing 'miss' damage when a full group against less-armored targets.

I totally agree with OP.  It is ridiculous, ludicrous and most of all: NOT FUN!!!!

I bought this to play a strategic war game - not a monster-fest Diablo clone layered on top of said wargame.

Reduce the monsters DRASTICALLY!  My hope is the devs will listen or set up an options screen like in GalCiv2 for events/monsters etc.

It can be frustrating. As time passes. why monsters seem to spawn so much? Why are they especially attracted to caravans? Why we can't bloody defend them properly? Even with being forced to micromanage the deployment of caravans it just takes one slip for a critter to suddenly spawn in a previously empty area for a 'combat' menu to appear (just to add to frustration) and indicate how doomed that caravan is.

I actually have the cheats option enabled just for this. Upon making a caravan I simply teleport it to the desired destination and voila, it's done. What a relief not having to worry about making roads to connect the cities...

Strange, I haven't actually seen all that many monsters in my game.  Of course I don't usually build caravans.  I also haven't been moving up the Adventureing tech levels that fast, which may help.