But then you could segregate your military and "evolve" them to have badass offspring.
I assume anything like that applied to animals ought be applied to all living creatures. It would be pretty sweet to one day enounter some goblin civ that had such a hard time they were actually tough.
I think Toady mentioned that he was thinking about breeding possibilities. Like Unintelligent said, it could be used to breed together animals. For instance, you could make pure breeds of animals, or mixes, or practice eugenics on your dwarfs (it should apply to all creatures). However, Toady or someone else mentioned the counterpoint that even with the ability to mix genetic traits, the time to maturity for both dwarfs and animals is so long that it's not something that's practical in play. At least not for quite some time. Mostly it would be for the cool but insignificant things like Unintelligent's example; on an individual basis, not a population basis.
To the OPs idea of evolution and natural selection: well, the foundation is still the raw data for a deer. If the only thing that changes is the deer's stats, and the deer with the higher stats regularly beat the others, then all worldgens are going to end up with the same kind of deer--for the statistically minded: the same probability distribution of deer stats.
So ... without actually evolving
traits, what is the point? It's just widening the randomization factor and increasing the bias for stats. Always stronger deer, with more variation in strength, and possibly biome-dependent. That's still a nice result, but it doesn't need anything like a full-on evolution framework to achieve.