The fundamental problem with heros is risk v reward.
Heros, as such, run the risks of being unique units. If they are killed, one will never see them again, therefore if they are not powerful enough to generally guarentee survival against a mundane unit, then they will be overly protected. Conversely, if they have the power to kill mundanes with realative ease, then their use as city-takers becomes VERY obvious. It's kind of a choice.
We dont want heros to be relagated to all "non-city" warfare because as it is, most of the interesting combats happen around or in cities. Therefore, to nerft a Hero in that way, would reduce the entire hope of their existance.
Also, as world units, commonly one should be rewarded for building a hero before others - though this is mitigated by the fact that each civ has its own heros, and isnt in competition to build them. However hero vs. hero this can be/is still balanced.
The notion that the heros are singular has to be ignored, clearly there is some "elite" squad with them, lest an individual be able to capture entire massive cities by themselves.
I assume in the future, that heros primary purposes will revolve around questing and rewards from questing. Also, perhaps the great commander (eventually) could be replaced/supplemented by heros. In this, individual heros, would either be used for quests, or for creating armies of troops to fight in a war. In this, they're more specialized. Personally, i think it'd be fun if heros were able to produce some army bonuses, as well, then the questing would be seperate, but equally important, heros would have a niche that wasnt "uber unit" and everything might fall into line.
The problems with this are simple: At this stage in development - its not plausible, the features I described are scheduled for later phases. But, we still want to have fun with heros, so this is how they are..for now.
-Qes