re: Thug and SC definition debate
There's no single authoritative definition of what constitutes a thug or SC other than "commander who kicks a lot of ass solo". Except some thugs work in small teams. Yeah.
One decent sounding definition I've heard is an economical one. Basically a thug costs around 5-15 gems while SC's are a lot more expensive. This gets blurry when you consider that some people like to use words like "heavy thug" and "light SC". Beats me what their precise definition is.
So let's not get too hung up on what's the difference between a thug and an SC.
___
@Boksi
Hot diggity, I was wrong about their encumbrance. It's 5-6 for most troops which isn't horribly high. Thanks for pointing that out. As I said, their troops are great in a fight and their battlemagic is very good. Good point bringing up their 4-gem discount forging. For some reason I forgot to mention that. Quite silly considering I've played in a disciple match alongside Ulm where the cornerstone of our strategy was to equip a ton of thugs with cheap gear and kill everything.
With all that I still wouldn't call them a strong nation. They're not weak or irredeemably broken in a bad way. But I wouldn't bet on them to win a match either.
I guess it depends on whether you view their strengths or weaknesses more. I see their low MR, poor magic diversity and lack of mobility on and off the battlefield as things that will bite them in the long run. Kitting all of your battle evokers with 1-gem girdle and 1-gem eye of aiming isn't enough to tilt the scales in my view.
Maybe I'll get beaten by late game MA Ulm someday and change my mind. I wouldn't discount the possibility.
___
re: good chaff
You want the expendable chaff to take hits instead of your more precious mages/units. High HP lets them take more hits, high morale (or 50/99 value that mindless and berserking units get) keeps them from routing as they get hit and good defence/protection/MR/resistances/buffs take the sting off of certain hits.
High HP is generally inherent in the unit, though the global enchantment "gift of health" can help that somewhat.
High morale is easier to "fix", as good leaders can provide +2 or +3 morale to their troops, wear items to boost it further and there's a H2 spell that boosts morale by 1 as well. So a standard 10 morale unit can with some effort reach 16+ morale.
There's plenty of buff spells you can cast on your troops. What you can and want to cast depends on your nation.
As an example, astral nations often cast body etheral/luck/twist fate on their troops. First makes the unit ethereal, negating 75% of all regular hits, luck provides a chance (25%? 75%? I forget) of negating any attack that would have killed the unit while twist fate negates the first hit the unit suffers (not counting instadeath effects of certain spells/items). Astral isn't the only school with such buffs, but I'm not about to write a Buff Guide: All the Nations here so that'll do.
___
re: Gear for monstrous pretenders
I like the horror helmet if I can get my hands on one. Fear is good to have, though many such pretenders already have innate fear. I'm not sure if it's worth it to stack it, but I do it anyway. They also usually have one or two misc slots, right? I guess the usual misc items work here: girdle of might or amulet of resilience for more of that sweet, sweet reinvigoration. Amulet of magic resistance if you need the MR boost (soul slay is a bitch). And of course the wound fend amulet (80% affliction protection, I think) helps keep the dragon useful for longer. Ring of regen is another that's really good on a high HP chassis. And I guess specific resistances if you're fighting specific nations, like fire/frost resistance ring if you're fighting niefelheim or abysia for instance.
I'm not sure if the monster pretenders are useless in combat in the long run. Sure as counters get researched and deployed it's going to be more dangerous for a dragon to fly around. But it's still a flying hulking piece of destructive force. You just need to be careful with it.
The more immediate reason you don't use a dragon or such later on is that it likely picked up some afflictions at some point when you used it earlier in the game. Some of those afflictions are pretty bad for a combat pretender and odds are you'll want to keep him in a lab after a while. Though afflictions are a thing that more humanoid SC's have to worry about too.