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Bullwinkle, we just had our first results with some Chinese troops on reserve status [well, first since the latest patch]:  reserve status didn't help much.

To recapitulate:  the Japanese are besieging Chengtah.  Three or four Japanese deliberate attacks were easily repulsed, but the engineers reduced the forts from six to three.  Then the Japanese began bombardments using seven artillery units.  The results were grim - roughly 1000 casualites and something like 15 infantry squads and 20 non-combat squads destroyed per day.  (Interestingly, these casualties were comparable to those sufferd by the Chinese when the artillery bombarded and the infantry attacked; ie, the artillery alone was comparably potent to artillery plus infantry].

I then put about 1/3rd of my 4,000 AV into reserve status.  The two most recent bombardments resulted in the following:

2/26/43:  926 casualties; 11 infantry squads lost/39 damaged; 17 non-combat squads lost/63 damaged.
2/27/43:  871 casualties; 13 infantry squads lost/36 damaged; 7 non-combat squads lost/58 damaged.

I can't speak for the Japanese supply situation - perhaps the bombardments are sucking Miller dry.  But to this point he's shown no decrease in attacks and bombardments, nor has he mentioned supply problems.

Based on this and previous data, here are my conclusions and questions:

1. Massed artillery against well-entrenched troops (six to nine forts) operates reasonably.
2.  Massed artillery against non-entrenched troops or troops behind up to three forts is too bloody, meaning either the fire is too effective or the aggressor can bring too many to bear at a time in a single hex.
3.  I have no information on the effectiveness of level four and five fortifications, yet.
4.  Putting troops on reserve status has little effect on bombardment casulties.
5.  Has the tweaks to the artillery model to dampen the effect of massed artillery had a detrimental effect on the employment of "un-massed" artillery (some players are complaining that the use of one or two units has too little effect).
6.  In the long run, does supply usage make the use of massed artillery too costly?  [That could be a possible solution, but I have no data on which to draw any conclusions; Miller might shed some light on this; my hunch is that the answer is "no" since he continues to liberally bombard in China]

Putting troops on Reserve definitely reduces the number of units that get hit by artillery, unless it was changed in Patch 2. Any unit in Reserve does not get fired upon, and since artillery seems to be so damaging due to spread of damage over large number of units, there are less overall casualties when units are put in Reserve. One easy way to check this is to see what kind of shape the units in Reserve are in after bombardment. I would imagine you'd see a much better disruption/fatigue level in the Reserve troops.
 
Again, this may have changed in Patch 2, but under Patch 1, Reserve troops absolutely were protected from artillery.

I haven't seen that in my game.  I had troops in reserve status after patch one and it didn't do a thing.  I've now had them in reserve after patch two and the two hot fixes and the results were negligible.  So either reserve status isn't effective or incoming fire that otherwise would have hit troops on reserve status hits those that aren't on reserve.  Whichever it is my casualties in a hex remain essentially the same whether I have troops on reserve or not.

ORIGINAL: Canoerebel

I haven't seen that in my game.  I had troops in reserve status after patch one and it didn't do a thing.  I've now had them in reserve after patch two and the two hot fixes and the results were negligible.  So either reserve status isn't effective or incoming fire that otherwise would have hit troops on reserve status hits those that aren't on reserve.  Whichever it is my casualties in a hex remain essentially the same whether I have troops on reserve or not.

Reserve mode does seem to make a difference.

Your combat results, with all units in Combat mode: 1509 casualties.

Your combat results, with 1/3 in Reserve mode: 871 casualties.

That's over 600 fewer casualties using Reserve mode; certainly enough, IMHO, to justify using Reserve mode when possible.

As for your conclusions regarding massed artillery against non(or lightly) fortified units-

Wouldn't the simple solution be the use of a house rule limiting the number of artillery units in a hex, rather than changing the code?
As you have noted, tweaking the code might make artillery completly useless, unless massed in large, unhistorical numbers. I would complain loud and long if such were to happen, and I don't believe i would be alone.

As for historical numbers of artillery units- at start, the Japanese only have 9 artillery units in all of China. Massing all of them, plus moving in more from other theaters, is something the Japanese never did in WWII. Furthermore, only one of the at-start artillery units in China is 150mm, all the others are smaller caliber. In the combat results you have posted, of the 7 Japanese artillery units present, 4 start assigned to the Kwangtung Army. Of these 4, two units are 150mm howitzers, and the other two are 240mm howitzers. AFAIK, 240mm howitzers were never used in China- they were used to bombard Corregidor, then sent to Manchuria. Again, the combat results you have posted indicate your opponent chose to use a-historical tactics, therby getting a-historical results.
The game engine should not be adjusted to recognize a-historical tactics, that's what house rules, and common sense, are for.