What you're suggesting was done in ASL in a somewhat abstracted way with Experience Level Ratings. If a squad failed a morale check by more than its ELR it was replaced with the next lower squad type (i.e. Elite became Regular, Regular became 2nd line, etc.) I think it would be a good idea, but I have no idea how hard it would be to program. I wonder if this is partly taken into account in CM. Does a sides global morale affect the way it acts on the battlefield beyond possible surrender?