So I have had several games so far, and besides Kari's strange ability to shoot out of a melee combat my one major sticking point is shooting into combat. It really seems to be to easy and without any real consequence. Can anyone explain the logic behind this? I know that in RL, this was notoriously a bad idea for your own troops involved in the melee, so why such a small consequence here?

Morale tests are not a small consequence. They are potentially devastating.

If the unit already has some panic tokens on it, they can be spent to increase the severity of the test.

That "small consequence" can quickly become your unit attacking itself, losing a tray, or turning to present a flank to the enemy.

In the last 4 games I must have had some strange luck then. It really doesn't feel like a random effect like moral is appropriate when your own troops are also getting hit with arrows but suffering no damage

Ranged attacks require line of sight to the target. That reason and the skirmish-level scope of the game justify how archers can manage to only hit enemies. At the same time, it would cause some panic and loss of morale when those arrows go whistling by their heads.

If you prefer, it could have been like Diskwars where you physically flicked cardboard chits at the enemy units. If the chit landed on a friendly disk, it suffered the damage.

Personally, I like this version better. [EDIT: And by "this" I mean Runewars' system.]

My guess is that you and your opponents aren't spending panic tokens on these morale tests to make them worse, like @Tvayumat suggested.

Morale can be crazy, but sometimes it does barely nothing or cycling tokens with rising panic. It doesn't do so much for the reanimates at the moment since Daqan have alot of blue dice and no morale dial modifiers. So even if my reanimates get a panic token it's usually not that scary.

I did hower get a triple morale test at me last game from a golem unit while I had a panic token.