Maybe Undead can have a promo with chance to convert unit to their cause after succesful battle...
...If a necropolis's cities population slowly changed from people to an 'undead' specialist you may be able to reach a compromise...
They couldn't build any units and their cities wouldn't grow from food, but they have a chance to recover the body of any unit they kill.
Well... That is not what I really meant... I think all of that is far different and hardly compatible with my ideas. Still welcome to imagine.
Well, I for one like the original idea, as it is simple, yet very uncomforting in a roleplaying kind of way. As infernals and their deamons are the ultimate target for hate, the undead would be a projection of fear on erebus.
As for myself I dislike more Order-Bannor with their totalitaristic tendency then Infernals as their comics-like evil is hardly believable and terefore funny. So pleasure from roleplay is of cathegory "de gustibus..."
And yes, undead are not a target for hate: they are something dispersonalized no matter of Barbatos.
For example, out of fear for the undead a civilization could forge a pact with the undead faction to let a certain percentage of their military to have their 'body claimed'.
Of cause. Keeping in mind breaking the alliance after victory. And remember that demons are invulnerable to necromancy. That is why I speak of the final match between Infernals and undead. With this our fantasy becomes really dark.
But remember that confessors with their destroy undead spell are really devastating for undead. Again if evil civs are prevail they have no such an effective tool against undead perhaps will join infernals against undead. There is a one more side - more strategy to play.
By the way Basium and heaven are not natural enemies of undead. They have nothing to share: first need souls, others - bodies. And only living civs want to keep both.
While Hyborem pretends to conquer Erebus and therefore potentially is an enemy of undead.
Most interesting political strategy is for undead. They really need living civs to fight Infernals or Mercurians... For any active action. Though their final objective is... quiet.
I have one more idea: for the terrain under undead control. Everything is the same as before but... in black-and white.