OK guys and Gals. Its definitive answer time . Just what effect does completing or ignoring the optional squad size upgrades have.
Regular scouting / progression on the world map .
There is no effect on the opposition of any kind, they will remain the same.
Having completed the optional squad size increase you will now have more troops to combat these encounters making them easier to complete .
There is no effect on the Goods needed to barter, and this amount will remain the same .
In Summary, there are no effects whatsoever on the Encounters, other than you have more men to fight with.
Tournaments
Completing the optional squad size upgrades will have the following effect
The enemy will increase in number, in direct relation to your increase in number.
The goods needed to barter will also increase, in relation to the squad size increase.
The fights on the Tournaments will therefore retain the same difficulty, you will just be using more men, and will cost more in goods if you barter.
So the choice is yours as a player to make, which path to choose.
Increase your squad size to make encounters easier -or-
Not Increase your squad size to make the tournament cheaper to barter, and use less men in the fights .