What I know so far:
1) A unit loses some of its combat capacity proportionally after breaking down.
2) Quality breakdowns seem to be extremely resilient barring being utterly overwhelmed or using them stupidly.
This makes me believe that if you are defending this is often not a bad option. After all an overwhelming attack against a full strength unit will likely force the unit to breakdown anyway. At least this way the defeat of a full strength formation will often require your opponent to use up more of their turn.
What hazards are there in doing this?
What advantages are there in doing this?
Division into Sub-Units
Sub-units will have only about 80% of the parent unit’s proficiency. If you recombine your units, the newly recombined parent unit will have 125% of the average sub-unit’s proficiency. This means that the act of dividing a unit and recombining it will result in no permanent loss of the unit’s Proficiency. During the game, units are frequently sub-divided automatically due to adverse combat results. Also, an Airborne unit might be sub-divided during an Airborne Landing operation. To determine if a unit has been subdivided, consult the Formation Report. Air, Naval, Coastal Artillery, Fixed Artillery, Supply, and Headquarters units may not be divided. Formations with a large number of divided units are more likely to be forced into Reorganization as a result of combat losses.
The obvious advantage depends on your 'Lage'. To defend a long front-line and defence in depth with a large unit split into 2-3 'Kampfgruppen'.