Historically it is true that actual battlefield casualty rates were pretty low (<25%), but when an army fled the field it often disintegrated due to a mixture of desertion, abandoned equipment (artillery was hard to retreat with), soldiers being seperated from leaders, lost logistics trains, etc.. If the victor had cavalry, all of these things were exaggerated.
So the game is right in inflicting punitive damages on a defeated army. Napolean in particular was a master of exploiting narrow tactical victories to turn them into massive strategic victories - witness the annihilation of the Prussia army after the comparatively small battles of Jena & Auerstadt. One of the secrets of the Dutch resistance was that they were always able to keep an army in being no matter how many battles they lost, in large part due to the nature of their terrain (it was easy to hide behind the next line of dikes).