So, there is a lot of gnashing of teeth on the balance issues. How about a RPS like system (to clarify, I am thinking more of a mixed unit tactics which I believe is supposed to be called RPS approach. There has been some contention about the terminology early in this thread) where:

AoE (Mages, Horrors, etc) single unit aka a stack of one unit that deals low damage to each unit in a stack. Thus they are effective in wiping out whole stacks in 1 to few attacks but deal piddling damage to singulars and AoE type enemies.

Singulars (Melee or archery sov/champion, giant beasts, etc) a stack of 1 unit which deal large amounts of damage but only to a single unit in a stack per attack. Making them effective against other Singular types and very effective against AoE type. but ineffective against an army/swarm.

Group (hundreds to thousands of soldiers or human-ish sized monsters). They are each individually weak, but there is a whole bunch of them. When engaged with an enemy they "swarm" all over them. If its another swarm/army they duke it out unit v unit. But if its a single or an AoE they try to pile up on them and eventually wear them down, which requires they get some bonuses against single type enemies, (although stronger AoE type will have defenses against that; such as a cloak of fire... of course you could custom build an army with a ring of fire resistance for each soldier to counter exactly that specific unit...).

To go more in depth:

Mages should have primarily AoE (aka overkill in elemental terminology, where damage is multiplied by toon count) spells that affect whole armies or everyone on the battlefield. Those naturally perform poorly against a melee hero who is too tough to bring down with such spells. They COULD attack a singular opponent for trivial mana costs and extra damage to it compared to using an AoE on a single unit stack. But it should leave them at a disadvantage (aka, only win a 1v1 against such an opponent if they are much high level)

Melee heroes should do massive damage, but to a limited amount of toons per attack, and the more toons you have the higher your accuracy (aka, armies don't really miss, but do low enough damage that it takes some time to finish off a melee hero via attrition).

Armies should increase unit count in armies by 10x at least (while keeping their costs the same, and also boosting gold production and construction rates so you could actually field any at all).

All those together mean you get mixed unit armies (rock paper scissors like) game and that you would be fielding all 3 unit types and actually have reason to do strategic battles rather then just soloing everything with your sov.

Note that all of the above are general approaches rather then absolutes. Elemental lords and dragons can have a combo of both AoE and Singulars (or even AoE and swarm for some more bizarre lords). And its not a guaranteed win to attack an AoE with a single or a group with an AoE... it merely confers a large significant advantage. A sov could also be an AoE/Single combo unit (just wont be as effective in both as a specialist).

The only place where there is a hard limit really is in a singular vs a group. Singulars cannot kill groups so they must bring with them their own groups or AoE to do that.