At first, I thought that part of the problem must be that old metaphor, "Knights were the tanks of the Medieval Battlefield." I've always hated this metaphor, because to me it conveys the notion that knights were these heavily armored behemoths who charged over the battlefield crushing everything in their path. Then I realized that the problem was not with the metaphor, but with how people interpret the metaphor. Knights really were the tanks of the Medieval Battlefield. It's just that most people don't understand how tanks are used on a modern battlefield, so the metaphor conveys a misconception to most people.
To most people, tanks are these large, terrifyingly powerful machines that crush everything in their path. In reality, tanks are large, terrifyingly powerful machines that are exceptionally vulnerable in extended close combat. The same was true of medieval knights. In order to use tanks effectively, it is essential to employ combined arms. The same was true of medieval knights. Tanks get a great deal of their effectiveness from shock. The same was true of medieval knights.
An assault by a massed formation of tanks can have the same initial success as a cavalry charge. Infantry unfamiliar with tanks will run from them or break soon after the initial assault, despite the fact that one is much safer standing his ground. Infantry trained to stand their ground and armed with effective man-portable anti-tank weapons can inflict serious losses on enemy tanks. Even if the infantry cannot hurt the tanks, the tanks have a hard time hurting the infantry if they have any sort of cover. If the infantry does hold their ground, the tanks are almost never able to achieve any success on their own. Instead, the tanks function to disrupt the enemy defense and suppress them so that infantry can capture the terrain. Tanks unsupported by infantry are extremely vulnerable in close combat against infantry.
In my opinion, M2TW captures this combination of power, vulnerability and shock very well. A cavalry charge is the quintessential shock tactic. It depends on convincing the enemy that he is better off running away than he is standing his ground and fighting. If the enemy realises the truth, which is that he is better off standing his ground and fighting, then he will win. Even before the advent of pikes, a tight formation of determined men could and did stop cavalry on a routine basis.
For examples, one need look no further than the battle of Senlac in 1066 A.D. (Hastings to all you Normans). The Saxon shield wall stood its ground against William's knights and inflicted substantial losses on them. It was only after the formation lost its cohesion through pursuit of the retreating Normans (whether retreating intentionally or fleeing until rallied by William) that the Norman cavalry was able to defeat the English army.
In M2TW this is nicely modeled by the very powerful initial cavalry charge that cavalry can get under the right circumstances. It would be more realistic if most of the men in the unit of peasants sometimes decided to simply run for it before the cavalry hit them, but this would be exceptionally annoying from a gameplay perspective. It would also be better if cavalry didn't inflict quite so many losses in the first charge. At any rate, in M2TW, if the cavalry can break the enemy line in its initial charge, then it will win with slight losses. If the cavalry is forced to engage in prolonged melee, then the more numerous infantry can and do usually defeat them or at least inflict serious losses on them.
When I am facing an army that is strong in cavalry, I usually use a double line formation. The first line absorbs the cavalry charge and is bears the shock of the initial assault. The second line then countercharges the cavalry and butchers them where they stand.
Conversely, whenever I assault with cavalry, I always back them up with heavy infantry. Once the cavalry has smashed into the enemy, I follow up on their success with infantry, who have more staying power in melee combat.
