1. I think they fixed the issue with for example ranged lowering defense against cavalry and by the end of the tournament all units cast spells relevant to their unit type. At least on the reports I saw.
2. It was not always the case that only one spell was cast. Moumiyas attempted to cast multiple spells in some cases. To my knowledge, they also failed every time they attempted to cast anything. I still haven't seen a report of successful moumiya magic.
3. The magic appears to depend on the type of the casting unit, with various unit types casting different spells that affected different numbers of units (for example on the spells cast by langs) or different percentages of attack/defense of different unit types.
4. There has been reference to the "Abjuration" spell school, which sounds defensive in nature. It's possible that the first combat magic available to players will be this school, which would protect from faction magic. It's notable that all magic cast so far has been offensive EXCEPT in the last battles where the Crimson Dawn faction employed a defensive magic. Perhaps a first demonstration of Abjuration at work? That's just a guess.
As for magic-wielding commanders being available at a high cost of prestige, I'm guessing that was an attempt at humor since it would be inconsistent with the way prestige is used in Illy thus far and with the principles laid out by the developers.