That's a very interesting suggestion, jim. (****, I sound like Dr. McCoy...)
I'd also love to see experience affecting the effectiveness of the units, not the hitpoints. I understand the reason behind giving an elite unit more hitpoints, but it's cuasi-ridiculous if experience doesn't make the unit perform better as well.
Experience should make offensive units attack better and defensive units defend better.
For instance, what's the difference between an infantry unit fresh out of boot camp and an elite infantry unit? The combat experience, of course. And combat experience is directly translated to how many times that unit succeeded. Because if it didn't succeed it'd be dead, not elite.
On the other side of the coin, yes, combat experience should also affect how hard to kill a unit actually is, to reflect the tactics and little things that unit learned to save its neck in countless occasions. So it should be a mixture of combat effectiveness + increase in hitpoints (*).
Example :
All units should start at Conscript level. If you have barracks where it's built, it should start as regular. And if you have the Military Academy wonder in that continent, they should start at Veteran. This is to reflect the refinement of tactics and intensity of training as time passes and your civ develops.
Conscript: 2hp - No bonuses
Regular : 3hp - No bonuses
Veteran : either (3hp - +1 att/+1 def depending if it's an offensive or defensive unit) or (4hp - no bonuses).
Elite : 4hp - +1 att/+1 def depending if it's an offensive or defensive unit.
So, this system would reflect not only that experienced units are harder to kill than newbies, but also that they learned to be more effective doing whatever they do best, something that the game doesn't contemplate as of now.
If you send both a conscript-level infantry unit and an elite-level infantry unit to take a city, the elite unit has more chances to succeed. But not because their skin is 2 inches thicker or that they learned to dodge bullets, but because they've been there, done that, got the t-shirt on many earlier occasions and they learned how to do their job better.
It's another example of the general defensive-biased mindset of the game as it is now... better units don't perform better, they're just harder to kill. IMO, it needs to be revised... that concept will get you kicked out of any military academy in the world in half an hour.
Peace...
(*): Hitpoints in Civ3 is just a metaphor representing how hard a unit is to kill. It reflects surviving tips and techniques a unit learns with time, not an increase in health or anything. If a bullet hits, it has the same chances to kill either if it hits a recruit or an elite member of a crack team. Crack teams, however, learned to minimize somewhat the chances of getting hit and that's what the game represents.
I hope...
PS: Oh, and those hp amounts I gave are not set in stone at all. I'm sure they're gonna have to be increased across the board for industrial/modern units, since apparently for the game 1hp of a spearman = 1hp of a tank.