Yes it will remove enchanted blade, and dance of blades just fine. I fired up the world builder just to be sure.
Interestingly you can't dispel magic across your culture border. When my troops and theirs were inside it works just fine, when we're both outside it works fine as well. But when I'm inside my culture and they're stack is outside I'm not allowed to cast dispel magic on them. Not sure if thats a bug or just a limitation of the game engine somehow.
P.S. units that are blinded by Sun II, Ie: blinding light can not be dispeled to free them as they do not gain a blinded promotion that makes them unable to move it just makes them unable to move for 2 rounds. This is similar to the way druid root works. Something else that kills anything happening in late. (perma rooted stacks.)
P.P.S. To: Taunke What I mean is since fear apparently uses the withrdraw mechanics that yes If I attack then his entire stack of fearable units is instantly teleported outside my border. In this particular game that was 6 squares away.
Sorry I didnt mean to get off track since this is thread is really about the retreat mechanic, horsmen being the biggest example. Ideally no unit should be able to retreat more than its actualy movement in my opinion, and definately no more than once per turn.