Personally I prefer a tight formation on hold fire (assuming spear throwing troops liking the various vikings), such that units shields tend to protect each other and I can just sit out whatever significant thrown weapon assault I face at the onset of a battle. As long as the formation doesn't break, I have seen the AI do a little better when dealing with opposing AI units, especially incoming charges. Formations break when you issue a charge, but not when you move them manually, either on the battle map, or by holding down the key to tell them where to hold position, or by issuing the 'advance ten paces' command.
