I can say for sure that when determining the strongest hero, they are compared only based on the diplomatic strength of the army, i.e., according to the formula: (sum of AI Value of all creatures in the army) * sqrt((1 + 0.05 * (hero's attack)) * (1 + 0.05 * (hero's defense))).
I can also say for sure that during the opponent's turn, the inactive player's information about the opponent's newly purchased heroes is updated, but the information about the heroes' armies is not updated. Also, heroes who arrive in the tavern with a single unit have a normal starting army at the beginning of the first turn, which is only replaced with a single unit when the hero appears in the tavern, i.e., during the first turn, the blue player sees as if all the red player's heroes have a starting army, because the information about its replacement with a single unit has not yet reached him.
From all this, we can assume that the hero with the strongest starting army is highlighted, which would be the case if it hadn't been replaced with a single unit (with a slight influence of the hero's attack and defense). This, of course, should be tested, but I don't think any other result will be obtained, especially since it is impossible to determine exactly what the army was before it was replaced with a single unit.
Yes, this seems the most logical.
