Aha ! I knew some intrepid simulation monger would find this point. However
your analysis is not quite correct. Adding a peasant to a stack will always
increase the offensive strength of the stack.
What you saw in the simulation was an effect of the rule on breaking, not the
combat system par se. To break a stack with 20 Nazgul, you have to kill 11
Nazgul. To break a stack with 20 Nazgul and 1 peasant, you have to kill
either 11 Nazgul _or_ 10 Nazgul and 1 peasant which is a lot easier. So a
stack with 10 Nazgul and 1 peasant may be slightly less like to win, but it
is does fight better and inflict more losses than the stack without the
peasant in the current system.
Carl Edman (who does Quantum Field Theory for a living and would
never stoop so low as to dirty his hands with Fusion)