It is not that much fun to lose over half of your mounted units in a single turn. This makes early warfare pretty difficult given the fact that catapults don't work either. Not really sure what is realistic but I liked it better before. FWIW.
I still have had some attacking fast units retreat when losing. It isn't too bad. I know that because my own cavalry/horsemen were kept busy finishing off enemy horse with one hit point left.
There seems to be a lot bigger problems with 1.17 than this one. And there ARE problems, and bugs. I also still HATE the mod's unit values, limited number of units and techs, and weird values for improvements and resources. Compare it to the LWC mod on the Completed Mods forum on this site.
I don't see any problem here. Last night I fought a war against Babylon with Knights and later Cavalry, and I'm pretty sure that my units retreated a lot more than 50% of the time if loosing the battle.
It may have helped that all my units were veteran or elite (Sun Tsu) though.
The only time i've problems retreating, is when i've been at wart against the Zulus. I don't know whether their UU (Zulu warrior/spearman) has any effect on this. If both units are down to their last bit of health, your unit will fight to the death.
The Zulu Impi is a fast unit, and therefore your units cannot retreat from it.
I really like the fact that you cannot count on your units to retreat. Wars become a lot more bloody, as they should be. Also, it means slow, defensive units advance more often, since they only get credit for winning if the attacking unit dies.