Yeah, I also looked at engagement penalties and thought, this requires granularity. I hope it works fine with 2d10, but don't be afraid to move up to percentile dice if you have to, like Basic Role Playing from Chaosium. You can get a quick start of BRP for free, to see how they do it.
I liked the engagement penalties because it isn't too hard to do. Every round, right after initiative, everyone declares who they are going to fight (attack or defend against). If you need to be formal, do it in reverse initiative order. Slow guys have to declare first. Fast guys can change their decision at the last minute to get the drop on someone.
Then do the rest of the combat round normally.
It might be fun to not let your players write anything down during combat, to see if they talk it out, who is going to cover who's back, and see if they forget one of the enemy warriors. "How'd he get behind us? I thought you had him."
Well, see what it can do. I look forward to it.