Your criticism is on point with regards to this being a battle simulator, and all other aspects being subservient to that. You conquer territories to finance your army, you research spells to either improve your battle performance or summon troops, you build forts to recruit your faction's troops. The only thing that doesn't really feed into the battles is Dominion itself (and even that, IIRC, gives you +1 morale.).
Unless D5 changed things, dominion itself can play pretty heavily into battles; above and beyond special dominions or globals that only effect dominion influenced areas, it has direct and substantial effect on the strength of prophets and pretenders, and import for stuff like immortals. Probably something else I'm forgetting, heh.
... that said, personally the dominion games like...
haven't been about the battles for me. They're pretty great and I like hands off-ish stuff a great deal as a general thing, but with dominions it's always been the battles enabling everything else -- the territory exploration and exploitation, the army building and commander outfitting, the skulduggery and world changing spellslinging. I've never really spent terribly much time on the battle organization and often enough don't even watch the fights, particularly if nothing odd happens in the results. Basic formation and spell orders and that's about it.
Battles were there to get territory to get gems and resources to get crazy explode-y things and rampaging supercombatants (which were more about the bling than actual combat performance for me

) and so on. I honestly don't think I'd mind something that was like... dominions
without the direct army vs. army encounters. All magic artillery, cloak and dagger, and champion duels/small squad battles, with maybe a fairly loose economy, but without most of the fiddly army stuff (and especially its logistics).
... gods, if someone like married dominions and ogre battle I think I'd be in some sort of game heaven.
E: Though now I'm kinda' wondering how a "commanders only" Dom game would play out. You'd probably have to fiddle with things to make the early game not a complete slog (like... somehow start with 10-15 commanders and a spread of cheap magic items?), but after that it might be neat. Pretty certainly would be a very different playthrough, in any case.