Actually, its quite historical. Many armies were taken captive and released on the condition that they march back home and not fight again for a set period of time, or march back without arms.
Really? Neat.
There should be a limit how far can an army retreat. 3-4 provinces would be nice. At least it would mean an end to all those ping pong battles.
This defeats the point of the mechanic. Armies would be caught and destroyed immediately in almost all circumstances.
My preference would be the army is destroyed, however a portion of the troops would then start to reform close to the capital or a major city away from the front lines, just to simulate the breakdown of the army and those survivors making to another barracks and being brought back together.
This is exactly what the mechanic does, except it doesn't despawn the army. That's why it doesn't reinforce until it gets to its destination.