Great update!  Like it! 

By any chance that Monsters will claim unmprotected (or outright attack) cities, so it become their new lairs?  This will make the world even more 'living'

This part I'm not too sure about. Everything in Elemental Screams "EPIC", but 3 minute battles? That's quite Anti-Climactic, especially if you've worked all game to raise a Massive Army to have a grand Last Battle. It wouldn't feel very "Grand" or "Epic" if it was cut short for arbitrary time reasons.

I say let the battles flow Organically. By this I mean let them take as long or as short as they need to (For Single Player). If that battle only takes 3 turns to win or loose, then so-be-it. If the battle draws out to take 20 Turns, so-be-it. Don't forget that the player can hit "Auto Resolve" at Any Time, right? If I manage to work hard and get a huge army of 20,000 Soldiers marching on my enemies last capitol, and they have a large amount of soldiers, I'd like the battle to be glorious....not over in 3 minutes.

For Multi-Player, That's When You Should Limit the Time of Battles. Why? Because unless it's only a 2 player game someone will be waiting around. In those cases then yes, battles need to be over rather quickly to keep players from losing interest and leaving the game.

Yep, I too don't understand why a caster with a sword (with +1attack Speed) should be able to cast more spells than if he doesn't have a sword. And why someone with a swords could move faster than someone without one.

There is already an option for that, and it doesn't require a restart when changed.

I would much prefer a different method of Auto Resolving.

With strategy games in the past, I have always given up on auto resolved battles, as about the most anoying thing is taking casualties in a fight you could have won better yourself. If there is a threshold, I will end up setting it to tactical battles whenever there is at least one unit on each side.

I'm especially interested in battles such as 'a few heroes vs an army' or 'an army vs a dragon'.

So, instead of making a threshold about how big the battle is, instead bias the auto resolve to deal with the battles that are boring. For each battle that is about to happen, work out what the auto-resolve results would be, and then, when the player is comitted to the battle, let them either accept the auto-resolve result (eg have a button that says 'win with 10% casulties', or 'lose with 80% casualties'), or to actually fight the battle themselves.

This way, players get to auto-resolve the fights that are prety much fore gone conclusions, and fight the interesting ones, where tactical changes make a difference.

I absolutely agree.

Isn't that just going to lead to people doing tactical battles in fights where they really shouldn't need to, just because auto-resolve is deliberately cripped and causing casualties that shouldn't exist?

That will just annoy people, and will turn into a knock against the game with it's "poor auto-resolve".

Can you give me an example of a fight which a player "shouldn't need" to fight? I think I know which ones you mean, but I think it would be best if you gave an example.

Sword of the Stars is not a valid game for comparison, especially since the 3 minutes is a hard limit in the options (which can easily be extended). The way its system works is battles can easily last 30+ minutes when you've got hundreds of ships constantly reinforcing.

My Sovereign + 10 peasants against your 3 peasants. In a tactical battle, I'm probably not going to lose any units in a fight that lopsided. In a good auto-resolve, the same thing happens. In a bad auto-resolve (either becaues it's just inaccurate or because it was deliberately designed to be inaccurate) it charges my units in one by one and I lose units for no good reason.

This kind of thing happens all the time in games with both auto resolve and tactical battles, usually because getting auto resolve right isn't easy (especially in games that use shortcuts to save CPU time like AoW). Deliberately screwing it up so I have to manually control every fight is just going to slow the game down.

Questions about the tactical battle setup, is there a "Unit" limit for the battles or is it just going to scale the maps appropriately? 3 minutes to complete battles? Really? I'd be fairly disappointed to amass an army and end up in a large conflict with thousands on both sides only to have it end in.... 3 minutes. It makes me feel like there's going to be a lack of thought involved in the tactical battles, rather than planning out the conflict you can just throw your guys in and it'll be over just like that.

This of course assumes we'll actually be able to recruit groups of units of a substantial size eventually. I intend to pretty much play exclusively on the obnoxiously large maps offered via the 64-bit version eventually, it's logical that conflicts on those campaigns would escalate to these epic proportions, even if your army of thousands is composed entirely of groups of 10 guys, in a world that large it should be possible to amass that.

I was so hoping this battle system wouldn't just be another HOMM setup, oh well. Everything else about the game sounds/is amazing and everything I was hoping for. I was even having a bit of FUN playing your evil horrible broken painful beta

I don't think we're really disagreeing with each other - Wintersong has the right idea of what a proper auto-resolve feature looks like: