Yes the command total includes baggage - that is OK
but when the command is lost, the army only loses the command total WITHOUT baggage - I'll change the list generator I made (I think there's a few isn't there?) some time today probably to reflect this.
So using Platypus's example above and expanding it a bit:
Command 1: 9 ME + 3 Bg ME = 12 ME. disheartened over 3, broken over 4, shattered over 6
Command 2: 9 ME + 3 Bg ME = 12 ME. disheartened over 3, broken over 4, shattered over 6
Command 3: 9 ME + 3 Bg ME = 12 ME. disheartened over 3, broken over 4, shattered over 6
Command 4: 6 Army baggage = 3 ME. dishearened over 1, broken over 1, shattered over 1.5
So army total is 39 (3 commands each of 12 + 3 for the baggage command), so defeated if it loses more than 19.5
But each of commands 1, 2 and 3 only count as 9 ME lost when they are broken - because they only have 9 ME of elements, and only the elements actually in the commands count as lost - the 3 ME for the baggage do not count as lost because those elements are not actually part of the command.
If Command 1 and Command 2 are broken that's a total of only 18 ME - the army is not broken.
Also if the baggage is destroyed then it only counts as 3 ME's lost because only the 3 ME's in het baggaeg command actually count lost.
Commands 1, 2 and 3 will become smaller if the baggage is lost, making them easier to break - ie they will count as 9 ME's instead of 12 since they no longer have baggage, so they are disheartened at 2.5, broken over 3 and shattered over 4.5.