In the first game I played we where taught that a tile containing routed units will automatically retreat if engaged in combat before being stood up.

Loved the game so much I went out and bought it myself, read the rulebook and arrived at the conclussion that a tile containing routed units will be automatically destroyed if engaged in combat.

Which of these would be the correct one? (preferably followed the a reference to the rulebook)

Thank you in advance

If a unit is already routed prior to the combat, if that side loses the combat, those routed units will be destroyed. Units routed DURING combat, however, may retreat.

This can be found on Page 21. Bottom of left-hand column says that units that were "already routed at the start of the battle" are destroyed. It also says units that were routed "during this battle" may retreat (which is an exception to the normal "routed units cannot move" rule).