I second the opinion that smaller battalions would suit the context better. Needless to say, rendering some of the exclusive units of both outposts (or all of them, as to say) elite would actually make said sub-factions a good deal more appealing. Balance and values aside, this might be a rather good start to move from, though I've not figured out how to keep the whole ensemble coherent yet. Logically, elite troops firstly exist as a prerogative of the main faction; the beating heart of the entire structure. So, one great challenge of whatever proposal would probably be to conceive a harmonious and detailed design that takes into consideration every single aspect we've hitherto hinted at.
A few possible guidelines that could help the debate develop:
1. What will be the general logic behind the concept? A quality-based one, or just a balance rearrangement?
2. If elite troops are to be included, they would necessarily need a set of distinctive features to dispose of.
3. How will all reconcile with the main Dwarven castle/camp? Dwarves already have a couple of unique tricks up their sleeve. Not only will suggestions have to fit well in the holistic portrait, but any distinct ability or mechanics should sport a satisfying degree of differentiation, too.
Anyway, I myself don't feel like proposing something specific, for now. I haven't pictured anything fixed or defined in my mind. I'll gladly let others take the initiative