The board doesn't put in spaces. It was supposed to be near the front The diagram is slightly askew. But as Johan said it's good that you can't always have something attack the rearmost. And a common tactic is to put a reserve slightly behind, atop or in front of your Commander pile to distract any squads/fliers from killing your commanders and causing an automatic rout.

I consider it being akin to an actual General. You can tell your soliders where you want them and what they are to do; but how they react is based on the men (Or in this case the AI). You just have to learn the ins and outs.

I don't know if having a unit rear or flank a squad causes a morale check; but I know it does allow more attacks vs a squad thus more attrition thus more morale failure. It also doesn't allow a larger squad to sweep around the ends and engulf a smaller squad, as the computer will have extra units that are not allowed an attack to go around the edges to try to get in the mix.