Well, good ideas keep on coming. But why would we need an additional character in the strat map?
My suggestion was to basically add a part to the UI where you get to maintain your "Mercenary Relatives" say for example you have 3.
You would "Pledge your Sword" to a certain player party (Army) and you can only fight in his battles. You could do this with three players simultaneously. You can switch them at will, but there will be a distance countdown as your "mercenary" goes to his new army, and a time cooldown from which you can switch his loyalty again.
E: This sounds kind of like your Battle Banner idea.
I guess the best solution is to come up with a system which can easily be added into the current one. I think the distance based formula would not help big clans at all. Smaller the clan, closer their members to each other; which means the costs of roster is smaller. If your members are all around the map, you'd need more money to get them into your particular battle roster, don't you think?
My thought was that some larger armies can actually split the army up to multiple players, and they reinforce the main army when it comes time to battle. In cases like these, large and organized factions will not only save money by paying less troop upkeep (of course everybody can hold 49 for free!) but they would save a TON of money on the travel fees, as a lot of players will be right there. It's even more win/win than it is now, if you're organized and coordinated enough to pull it off.
You're practically safe with your faction's giant army marching towards the city - and heck - with more players approaching the fief you're sieging (as an example) there's more friendly bands to attack all of those 0-size AFK crafters coming out with a few day's worth of goods, so the potential for even more spoils of war is there.
I just think that, given what I've seen, this would hamper a lot of battles. Getting players together at a certain time already seems difficult enough, without having to worry about their position relative to the army. I know that LLJK and CHAOS, the two factions I've been with in Strategus, would have had serious issues hiring players to defend them if this were the case. Perhaps our attackers would not have been able to field these armies - I am not sure.