Like most turn based games. Tactical battles are resolved "instantaneously" as far as the strategic turn is concerned. You can choose to auto-resolve the battle or lead it personally.
City battles are timed, I don't remember how long, usually there is plenty of time unless you are being too conservative in marching around the enemy city. If the defender holds the city for the timed period, then the defender wins. The attacker must capture the city square and hold for 3 mins. Other than city battles, I don't think there is a time limit, it's fight until you win or the other wins.
Even though some have mentioned a mini-hex grid for tactical battles, Bogroll's 0 move argues against it. So I believe hexes apply to strategy only, not tactics. Battles are engaged by turn, but once engaged, they are resolved RT.
Pretty much everything Aquillion said.Erfworld's rules are much less constraining than many people seem to think they are. The turn rules / movement rules only slap down magic forcefields between hex edges; aside from those, and a few additional rules that govern who you can attack and unit strength, we've had every indication that Erfworld behaves more-or-less like the real world.
In other words, yeah, "cutscenes" -- but combat is also cutscenes in Erfworld. All of it. A unit's stats influence how it does, but you can (say) seize the higher ground within a hex, or fill a hex with poison gas, or drop rocks on your enemy, or use any one of a million other real-world tactics with no regard for game mechanics. Once you're inside a hex, while your stats might determine how strong your arm is or how good you are at combat, you still have to physically run up and swing your sword in a real-world fashion to kill someone -- it doesn't happen automagically.
As for the whole Scout argument. It's worth noting that in many turn based games, special units, like scouts, are not attackable except by other special units, such as assassins or other scouts.