So only major losses on offense, not defense, allow the penalty reduction?
Well, it may have something to do with making it easier to get the better Union Generals into the armies since the Confederacy has a clear advantage in it's General battle/activation ratings in the early part of the game. Since it is more likely for the Confederacy to win a large battle in the early going maybe the penalty reduction for the General replacement is more of a balancing issue for the Union. This way they won't have to lose a large battle, pay a strategic will cost (an eight point swing or more depending on fortunes of war), and then also having to pay the full strategic will cost to get a better replacement into the game.
I am sure Mark Herman had his reasons...