The monster thing is likely to be fixed eventually by the devs, but we will have to see what improvements are made in .984. They claim faction AI won't settle near monsters and monster aggression when wandering will depend on difficulty. What we could do is make each lair stay put as DsRaider suggests. Then have the lair spawn enemies that wander in a radius of 2 and respawn quite often. That was my solution anyhow. I also hope the devs eventually teach other factions to sweep an area so that the human is not the only one sweeping up monsters. I notice the AI does not think in terms of clearing an area. Hopefully a few more updates to the AI will make it choose better targets to attack and link that to settling logic.
I am about to add 8 extra units to hero huts. I suggest you do the same.
I played your earlier weapon mod. It had some good logic to it. I used much the same idea in my mod, except I reward late game techs with massive power that as a high cost. But up until the midgame, I agree weapons should have inherent tactics associated with them and new weapons should simply add more choices and counters. They shouldn't simply overpower the previous techs. A good way to do this is to keep a tight control of weight capacity and increase the penalty for going over the limits. Beyond that, there are a few posts where people have talked about their personal additions to melee weapons. Adding some interesting effects via meleeappliesspell is the way to go.
Some of my ideas on this:
Weapon Abilities:
Axe - 20% chance to get an extra swing at full damage
Dagger - +2 Counterattacks (Other people used a Bleed mechanic, which is essentially poison)
Maces - Bash, high weight capacity and damage with an Initiative penalty makes these strike slow
Staff - +4 Defense to mimic its ability to shield you from blows
Shortbow - -4 Initiative, low damage, low labor costs
Longbow - -8 Initiative, high damage, costs metal and more labor (also considered a low damage with armor piercing to get an absolute value of 2-4 damage.
Hero Abilities:
Cleave - 25% chance to do damage per soldier in the unit
Crack Armor - 33% chance to reduce enemy armor by 5% (stacks)
The list goes on, but surely some of that could work to make weapons take on specific roles, more than just upgrade power. When it is a straight power upgrade, add weight and increase the costs. That limits the number of super units, which is acceptable as long as high quality units can be defeated by weaker ones. I still haven't been able to balance this against spellcraft because ranged attacks cannot be resisted with spell resistance.