[Edi]

Mounted units do not suffer from armor encumbrance for purposes of melee combat. It reflects the horse doing most of the work of carrying the rider around, even though mounted combat is by no means effortless. This is why they have a higher base encumbrance than infantry.

Mounted units do suffer full effects for spellcasting, so slap something like jade armor or Bogus's Greenstone Armor on a mounted mage and watch them fall off the horse from fatigue right quick.

For the record, I have never seen a mounted unit get encumbrance from its starting armor, except for spellcasting.