I suggest that we cease bickering about the extremely difficult-to-define difference between tactics and strategy. Whether something is tactics or strategy will differ greatly depending on what scale you wish to look at things.
Now, Camikaze, you have always advocated for an "exponential" penalty whose slow but steady increase will render the total power of a stack logarithmic ensuring that additional units will always increase the power of a stack but at a continually decreasing marginal gain.
However, though I do agree with the spirit of the proposal, the mechanics of Civ4 so not lend themselves well to this, and it would be a non-transparent and largely incomprehensible penalty system to most players.
The reason that the combat-system of Civ4 doesn't lend itself well to this is a combination of two factors: The combat effectiveness of a unit is proportional to the Square of its power, and if you look at a graph of "Victory chance vs. Strength Ratio" you will see that it contains several discontinuities, the most significant ocurring at 1:1. The difference between 5v5 and 5v5.1 is immense. By having a slight advantage in terms of strength, the odds of victory go from 1:1 to closer to 2:1. In many places, a small strength difference will have a rather huge effect while larger differences will have a lesser effect in some areas. (This is due to the fact that damage-per-round increases for the attacker and decreases for the defender, and so there are points at which it takes an additional hit to kill the stronger unit, or one less hit to kill the weaker one) Basicly, there is a non-linear relationship between power and combat effectiveness. Remember that an Archer has over a 90% chance of defeating a warrior, even though it has a strength ratio of 3:2 (plus a first strike). So again, I do support the spirit and intentions of your proposal, but I do not believe that it would actually work out in the way in which you intend.
Now, and I think this was brought up earlier in the thread, it is always best to deal with things in terms of "Bonuses" rather than "Penalties". Given the difficulties in coming up with an effective means of penalizing the concentration of troops, I think there should simply be an increased benefit for somebody attacking a stack. We could simply take a page out of Alpha Centauri's combat system whereby a successful attack against a stack of units by ANY unit would result in collateral damage for the whole stack. No fancy system of increasing weaknesses for each additional unit to the stack; the units in a stack are simply more vulnerable to focused firepower.
I think though, that collateral damage to every unit in a stack might be a little severe, especially given that this would impinge on the role of catapults, but something similar would be good. Maybe each "Anti unit type X" promotion (Shock, Cover, Pinch, etc.) would enable that unit to be able to deal collateral damage to units of that type within a stack in a similar fashion to how cavalry units in BtS can deal collateral damage to siege units. This will increase the vulnerability of stacks
and increase the necessity for the diversification of unit types and promotions.
Aside from this, Civ4 really has no existing mechanisms by which a "large army" might suffer the realistic penalties that a large concentration of forces might have. No Supply lines = no Supply problems, and no capacity to disrupt the enemy's Supply lines nor engage in "scorched earth" tactics to penalize invaders. This is the main reason one might want to disperse one's forces, the other being the potential of "being flanked", which again is non-existant in Civ4 as armies have no "flanks".
Providing an increased availability of collateral-damage is within the existing framework of Civ4, and requires only a simple modification to existing promotions.
edit: The main "jump points" for the increasing combat ratios occur around 1, 1.4, and 1.6 (1.387 and 1.571 if you really care). The rest occur at ratios that are already in the "guaranteed victory" range.
link: http://www.civfanatics.com/civ4/strategy/combat_explained.php