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3. units encountering enemy at range 1 should ALWAYS return fire at least once before "bouncing" if forced to retreat (i.e. move adjacent, take fire, give fire, retreat.) fire for the moving unit in this situation should be calculated BEFORE deducting casualty losses caused by the initial defender "volley".
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Historically troops with shoddy morale or poor training have been known to run from enemy troops without firing a shot. I believe the staying power of an infantry unit under these circumstances is in part related to their morale and experience ratings. If we're talking about realism than I don't think we should assume that every 14 year old volkssturm should be capable of putting into practice whatever meager training he recieved in a combat situation.
Furthermore, while you are correct in your observations about infantry combat in Steel Panthers, what you're suggesting is largely outside the scope of the game. Infantry combat may be murderous, but its as murderous for them as it is for you. Proper usage of infantry tactics at the platoon level and above makes up for the lack of control at the squad level and below. Covering fire from other members of the platoon or the weapons platoon is there to provide a defense against other forces being brought to bear as one squad engages another or a similar objective (tank, MG, emplaced position, etc). You don't want to put yourself in a situation where you're smacking up against emplaced enemy infantry anyways. There are quite a few historical examples of such encounters leading to the near decimation of the advancing force. Ambushes work well for a reason.
Unless things have changed, stationary and unsuppressed infantry in my experience in-game have a habit of trading fire with minimal casualties and its only when the unit becomes suppressed (representing panic, loss of C&C, etc) or the unit is moving fast (also creating a possible sense of confusion and a drop in C&C) do casualties rise. Even at 50m most infantry disengage quickly rather than sit there and be chopped up, and if you're trying to stick it out rather than pulling back to the equally effective 100m range and what is likely associated cover you will likely be in a bad way quick. Furthermore if you're tasking individual squads with the destruction of individual squads in a 1 for 1 rather than using superior tactics, equipment, and/or numbers you're really not appreciating the scope of the game.
Lastly, one has to realize the scope of the game. Enemy infantry units must are destroyed much in the way vehicles are. When they have reached a critical point or their crew has been exhausted its over. It requires a certain increased level of lethality in order to work as a game, which it is first and foremost.