The point is that even with 2 factions, you get a VERY large number of combinations. And with the -1 morale, it's unclear whether it will skip a turn or not; there was a similar mechanic in Disciples 2 with a 20% chance to miss any attack, which wasn't very enjoyable.
You can customize it, and that's fine. But 3+ factions are really for those who enjoy it. I saw something similar in The Elder Scrolls - the first impression was that it was a bunch of random units. Which also suffers from demoralization (I've encountered this).
As for me, playing with three factions is much more interesting. Yes, I agree that there will be many combinations, but that's exactly what makes the game unpredictable!
Человек – продукт своих мыслей. Ибо он становится тем, о чем он думает большую часть времени! Все будет хорошо! Верь в себя, и ты пробьешься!