As for incentivizing battles: Fucking silly. How about, instead of making the whole battle process inconvenient, we make initiating battles rewarding outside of the battles themselves, on the Strat map? If you just want to get people to fight battles, then eliminate the Strategus map. Apparently, Strat's not fun enough to justify it's existence outside of the whole battle thing.
So you want in strat rewards for battles, like for instance owning more fiefs gains you more resources and then with those extra resources you can win more fiefs and gain more resources, etc. We had this, it was Strat 3 and it was horrible with the only thing stopping the UIF steam rolling the entire map being ping.
Also, since when was an incentive for having battles an automatic dis-incentive for the rest of Strat and why are smaller rosters "inconvenient"?
As for massive stacks, yes they do hinder battles but it is not the stacks themselves that need addressing. Changing the 1/3 rule has already been suggested and accepted as a way to negate their influence however we should also look to combat the reason they build in the first place and that reason is mostly fear. Fear that your enemies have more troops than you do and that by attacking you will leave yourself open to a counter attack. The fact that any attack on any faction on the map is likely to drag you into the full 2-block wars that are occurring makes it even worse. Conquistador have over 60k tickets in their 3 fiefs but who can they attack for a fun war? They have everything they need but if they attack Kapikulu/CotgS/Balde/OdE (all similar sized clans) then they will be considered to have sided with the Apostates. If they attack Peacebreakers/Barabe they will be considered to have sided with the UIF. And so instead they sit and do nothing.
You also forget the main thing which is preventing battles (certainly on EU) and that is the lack of battle commanders. There's only so many battle commanders and the burn out is pretty high meaning there's only so many full scale battles that can happen in a given time frame. Speaking as the Leader of a clan that has actively tried to encourage more people to get involved in leading battles, I can tell you that one of the main reasons people don't step up and volunteer is that the thought of trying to command 50 players from many different clans (with varying languages as well in EU) is pretty daunting. If on the other hand they were just leading mostly their own faction members, that they know well and are comfortable with, then I know they wouldn't be so reluctant. Now imagine how daunting this is to a small clan that is going to get at most 10% of the roster as their own players.