It worked!
I managed to surround their largest army, and wiped them out. I used Bards, Longbows, Daoine Sidhe, a few Slingers, Horned Serpents, one Lord, one Tuatha and the Eternal Knights which I got just in time. Panic was cast a few times, don´t know if the Bards did cast Panic or just the Tuatha. I might have won even without Panic, but I think it helped. Lost only 3 or 4 men, though a few Daoine and a Castellan got feeble-minded.
I am now finally numerically superior to Ermor, so I think they are finished! Thanks to everybody who gave advice, even those who were sceptical about my brilliant strat!
Special thanks to Saber Cherry -you were dead right about the necessity to rethink my Research.