I think Ailric's idea is a great one not only from the perspective of the players to engage in PvP more, but for the developers as well as it could encourage another avenue of crown purchasing that players would be enticed to engage in.
I would say that it would have to be crowns paid at end of battle, so people would be encouraged to always have a ready supply of them in case of that occurring. I think however the units that are totally wiped out should all go to that post-battle pool of potential revive instead of only 50% to preserve that risk for the player. 50% could work, but it's really how punishing you want to be to bad plays, and I kind of agree with Moose on having such a punishment still exist for players - but Crowns would be an apt punishment that wouldn't drive players mad if they lost a unit due to a bug or a misclick.
What I'd Add:
First: I would add a bit more incentive to engage in PvP being to increasing the Crown reward for a victory in PvP, and to give a smaller reward to players who at least engage in it to begin with. Since instant retreat is heavily penalized it shouldn't have a problem of people joining just to retreat and get their Crowns (irritating for a player wanting to play), but if that did become an issue retreat from within a battle could be made more penalizing still. As for how big a reward that losing reward would be, I say a random amount between 1-2 crowns - not super awesome, but not nothing. And since it isn't nothing, and I might be able to revive killed units, I'd definitely try giving the battle a shot.
Second: Make an option for inviting PvP for players. Basically the opposite of immunity from attacks, it would be armies that would be welcoming an attack and appear in some way for other players to see, on the map or a regional window for players to see what armies are raring to go, organized by army size/strength. Some sort of indication for what overt opportunities exist would be better than blind mine-sweeping that currently goes on, and for those players who basically want to fight could just set that option for their army to appear on that list for fighting. Still could have armies that hit non-flagged groups just poking around, but for those people wanting to find others it might be a good idea to let them see each other.
Third: Some major city/regional structure 'Arena' where armies could go and fight in controlled settings. Basically like battles with different layouts, rules, and maybe less harsh punishments for losing (maybe units that die come back at minimal health outside of the fight, thus keeping people from just mashing armies together blindly in the Arena for crowns or whatever rewards there are since they wouldn't be able to win with a broken army). That would just be more fun outside of the more 'serious' battles where armies or towns can be annihilated, and provide a whole new realm of PvP options that would let players experience fun new variations on army fighting. That one would be later down in development though, but I think it would be a good direction to pick up sometime.