In my experience, it's a good idea to stick to a general's command limit, but if your enemy has a doomstack of 20-30 divisions in an adjacent province, only the most skilled and well defended Field Marshall can hold back your foes. The lowest ranking general works best with 3 divisions, up the the highest ranking at 12. I like to organize my armies in blocks of 9 divisions of INF or mixed MOT/MEC + ARM, or specialist groups of 3 like MTN, MAR, or pure ARM. Experiment for yourself, see what groups work for you, and the exceptions you create. For example, I block my PAR into 4, because I can't fit more than 4 transport planes in a single air grouping. Since PAR are really squishy compared to regular INF, it's still a good idea to have two groups of 4 PAR who get dropped behind enemy lines simultaneous by two separate transports, who work towards each other and group up. Just be sure to have a general who can command all 8 without penalties.
Air divisions tend to work best in groups of 4 divisions, regardless of unit type. Despite higher ranking generals being able to command more, 8 is the highest I'll try to work with in a single battle, but keep in mind that you can't have more than 4 air divisions in a single grouping. Anything more than 8 air units in a battle incurs heavy penalties, rendering them essentially useless, no matter what the command max. Can't have thousands of bombers and fighters cruising around one province!
As for battle size limits, I haven't seen anything, but DH represents the diminished effectiveness of large armies by incurring penalties to the offensive or defensive effectiveness of the attacking or defending armies. That being said, quantity usually still outweighs quality in my experience: a massive army of a few dozen divisions will wear down and crush a well trained, well defended army, led by a skilled Field Marshall commanding his max allowed without incurring penalties, even if he is entrenched in a mountain with lvl. 10 land forts.
Bottom line, try to exceed your enemies army sizes, but there is such thing as too much of a good thing. My best advice is play a Soviet Union campaign and take a look at the battle details and mouse-over the different units when your throw a massive army at your enemies.
