I haven't tried the military option yet but I'm hearing mixed feedback. Can anyone clarify? I have a ton of copper in my brand new fort and I was considering this option.
One thing:
Military (inactive) dwarves and civil dwarves spend their idle time in different ways. Military dwarves will go to their barracks / archery targets and train (although the barrack training will always be the highly ineffective "individual combat drill" as opposed to sparring or lessons), while civil dwarves will go to a meeting area and spend their time there.
In meeting areas, dwarves socialize - on military training, they don't. (I don't have 100% exact science on this statement, but it is at least very close to the truth based on a few 100 years of fortresses).
Socializing (-> marriage -> dwarf multiplication -> lots of relatives/kids for you military dwarves) can be an important factor for long running forts.
I play without immigrants (well, the first 2 waves) - so "social management" is very important for me, I need my dwarves to multiply a lot. But I guess that most players want to keep their kid count low - and, if possible, have the number of relatives of military personnel low.
TL/DR: Putting dwarves into military squads keeps the friends/relatives number of military personnel low because they don't socialize much/any in meeting zones. This might be great or not according to your playstile / what you want to achieve.