I didn't mean that Town Enhancement (TE) should replace unit upgrades.
I don't consider myself a strong Heroes 5 player; I only play as Humans, Elves, Mages, and Necromancers... and I don't know how things stand with the other three races regarding unit upgrades, but I want to say that I don't see the point in upgrading units for Light Elves, Humans, or Necromancers because of their upgrade tree. Because a set of various disables, especially in combination with the right artifacts, is more useful and applicable in a wider range of situations... both against all enemy races and in clearing the map (especially if the map is complex, not just empty).
My recommendation:
TE should tie the race to the magic of its castle (one school) and to "non-combat" skills that are equally useful for all races - i.e., logistics, education. These three skills should be for everyone. Moreover, learning TE should not prevent the player from choosing which magic skills of their race they want to learn... if this is impossible, then, in my opinion, it is better to go through three main magic skills of the race (as it is now with TE for Light Elves in fire magic).
No way!
upgrading all three lords on the path to TE - wouldn't that be too much? It's generally better to make it so that you can't upgrade all the lords - a maximum of two.
And the absurdity with TE for Demons and Light Elves needs to be resolved somehow (as I wrote above - Light Elves worship the God of Darkness, but for some reason, they upgrade Chaos, and vice versa - Demons worship the God of Chaos, but for some reason, they upgrade Darkness).
Added 3 minutes ago
Very often, TE is a very powerful thing; it makes sense to make it so that you have to choose between something, rather than mindlessly upgrading along the same path to TE, having all the good stuff
Блистает там воздушностью прогалин.
Но между кедров, полных тишиной,
Расщелина по склону ниспадала.
О, никогда под бледною луной
Так пышен не был тот уют лесной...