Old units are excellent under hereditary rule. It's a course of action that you can take before adjusting the culture slider. Just throw your old useless units into a troubled city for the.
I think the upgrade cost is a little high. Actually I wouldn't mind it, but the AI's cost is half. It's rather annoying that their entire army gets upgraded in a couple turns.
Well, it is half, thanks god!! It was set at 15% of the human player cost in warlords.. that was game breaking. Now, it is just a very good bonnus, and the AI doesn't use it automatically unless it has lots of gold, as a wise human player would.
To be truthful, lets say upgrading units is the alternative to use an economic system (commerce and all the infraestructure asociated with it) in favour of a production system, whereas you have better developed one system or the other will make you rather take this alternative more or less. Also, it is a formidable way to put up a competitive army from obsolete units in a rush (marathon speed being specially sensitive for this matter as raising an army might take for too long in times of need/unexpected war).
The trade off between gold and hammers being upgraded is precise to me, keeping it's consistency with the buying option enabled with Universal S, it also adds a small price to make veteran units and succesive upgrading meaningful (ie: if you upgrade a phalanx to pikeman and then to rifleman it will cost you a bit more than upgrading the phalanx directly to rifleman, to account for the standing of a competitive "in between" pikeman).