I usually skip questions like this after a couple of paragraphs, but I read yours all the way through. Very creative. I doff my spangenhelm to you.
Someone mentioned that these are hunting dogs, but I don't see that in your description. (As pointed out, I see that now in one of the rolled-up comments. These are some pretty well-trained hunting dogs! Me wonders what they're hunting to require this level of training...)
I also use war dogs in my milieus as far back as first edition AD&D and, contrary to what many of the other answers have indicated, I have found them to be very effective. They're the cheapest warriors you can hire and the easiest to train! And if your PCs and NPCs handle them properly you won't lose many of them.
Attack dogs are both a terror weapon, and an extra attack for your player or NPC. As a terror weapon, while they tend to be dispatched/vanquished fairly easily one-on-one, their effective armour class makes them difficult to get in the hit you need to actually do damage. They don't do a lot of damage on their own, but they latch on or can "knock prone" fairly easily.
One-on-one they're not good. If you send in your dog against a defending PC and just stand back to watch you'll likely lose the dog. Send in the dog then get in there yourself! When the dog latches on to your opponent he will take a dex penalty even if he isn't knocked to the ground, then you get in there and give your opponent something else to think about. PCs usually yell "Run Away!" under an organized/experienced dog attack.
An opponent under your dog attack must contend with the dog and your attack. Not only are you getting an attack against him every round, but so is your dog. The beauty about this is that there is no logical strategy to deal with it! If he attacks you then he suffers a dex penalty because of the dog. If he attacks the dog he still has to absorb your attack -- and you're probably going to hit him due to the effects of the dog attack! I've had experienced players literally panic under a dog attack. They don't know what to do.
You say that you're outnumbered, but a well-run attack using dogs with a little luck could force a morale check in your opponents.
In my worlds it also turns out that any war dogs in the group are usually "handled" by one character who is usually a proficient combat character, although my player groups have hired non-combatant war dog-handlers specifically for their support. That's not how I had envisioned it, but that's just the way it turned out. Your Vargr group seems to be a cross between the two. Clearly the dogs and handlers will have to enter combat as ancillary troops -- they go in supporting your main force: one or two dogs attack an opponent which is then engaged by one of your primary combat troops.
Dogs have two traits which affect combat: loyalty and training. Dogs can be a bit of a wild-card during combat, sometimes biting their owner accidentally, but they will tend attack the target to which they've been assigned and will tend to stay on that target even when things get hairy. In fact, even after you've killed your opponent the dog will tend to continue to attack the body until called off.
Loyalty can actually be a bit of a problem. If you own and have actually trained the dog, that dog will tend to switch his attention from what he is attacking to whatever it is you're attacking! You can let the dog go then run into another room to do combat with something else, but if the dog sees you fighting in another direction he tends to switch his focus to the target you've engaged. Because of his loyalty, you can't trust the dog to stay on a target which is different from yours.
I would suggest that you avoid plate on a dog. Yes the dog is weak, but he already has a pretty good armour class by virtue of size and speed. We've used leather, ring, and occasionally scale, but I don't believe plate is realistically workable. He loses too much dexterity, his attacks become far less effective, and he tires too quickly. (Not to mention that you're carrying around a set of plate for your dog!)
Another suggestion: we know that dogs have been used for martial purposes way back through even pre-history. They tend to take on specific roles: combat, sentry, runner. A runner will carry communications but will not fight. A sentry or "guard dog" is great at watching an area, but will not carry communications reliably and is also generally not as good in battle. Dogs used in battle are far more aggressive than sentry dogs, but they can still be used in that role. I cobble up an intelligence roll for dogs to allow them to learn multiple roles, but multirole dogs are a bit of a rarity -- you can't have a whole lot of Hooches, Jerry Lees, and Lassies running around all over the place! Most of them are like Marley, or at best Beethoven! [;D
So, my suggestion is that while the Vargr seem to be handling about 4 dogs each, some of those will be sentry-role dogs which will be used to patrol the perimeter. Some very few (1 in 10 or whatever) will be strictly for communication, or you may want to leave that level of complication out of the mix altogether for now.
Oh -- another suggestion! I don't think the herb is really necessary. Unless the dog is actually attacked from another direction the dog tends to stay on his target when loosed, even when something else gets in the way. I know what you're thinking, but if you just let these dogs loose on the battlefield today you might just as well send the Vargr home tomorrow because there won't be any dogs left for them to handle. Pair the Vargr up with one (or even four!) of your regular combat troops and send them out onto the battlefield (or bushwack or whatever) in teams. I mean, the handler and his dogs are already a team, so adding an extra pair of elbows shouldn't complicate things that much.
Those are my thoughts and experiences and I hope you find them useful. Good luck with it.
