Has anything like this been tried before, or is it even possible?
I know you can make a script to destroy one unit and spawn another unit at the same location, such as with the Kalmirr Union event/emerging faction. I suppose you could script to destroy one unit when it reaches a certain experience lvl, and then script a different unit to spawn at some location. As far as the EDU is concerned, 2 different entries count as 2 different units and towards the hardcode limit of 500 units. But if you have the space, you can make as many copies of a certain unit as you want and edit the stats to be different for each entry. Then script one unit to be destroyed, and another unit to appear, simulating the unit changing into another. But the problem is that I don't think it is possible to spawn a unit where a specific unit died. I think the best you can do is the nearest city or named character, though I am not certain of this.
However, if you are playing a mod with near or at 500 EDU units, you will have to delete a few to make room for new ones.
It's also not possible to destroy one single unit