That terrain allows spacing perfectly well. With or without pathfinding. Pathfinding would just make it more trivial. It’s true that you made that more difficult by putting your mace guy where he is, which you shouldn’t to begin with. If you would have put him to his low left, you would have no problems there. But even that position would be doable, because you need just one guy awake. Leave spearman where he is and put swordman one tile apart from spearman. As long as swordman stays awake, he can wake up spearman who can wake up mace guy.
Of course you had spread your men all around the map, and since there are more Albs then one, they can sleep all of your guys with rest of your team unable to help. But that was mistake in my opinion. You shouldn’t spread in to groups small enough for Albs on map to put to a sleep.
I do agree with you that sleep spell should not affect characters which aren’t technically adjacent, like when they are on two height levels apart. It just doesn’t make logical sense. But it doesn’t lead to unsolvable odds you claim it does. In terrain with movement penalties, you simply will move more slowly and keep your guys 1 tile apart, not two -unless you have Pathfinding that is, that’s all. Plus you have to be more careful and planing more thoroughly at the choke points, if there are some. Btw, this issue affects only mountain terrain, forests and swamps are mostly flat anyway.
As for fighting 10 Albs, unless you have some high resolve guys, you shouldn’t fight at all. In no terrain. They will likely put your whole team to sleep before you get your move. If you have that resolve, then terrain does not matter. It will just take more time. This is not the game were you’re supposed to accept every fight. There are many situations where you can’t realistically win.
It’s really simple, without Pathfinder in difficult terrain you need to keep your guys 1 tile apart instead of 2. And consider your movements bit more carefully. Moreover as end of your battle demonstrates, it’s not that you aren’t allowed room for few mistakes as Alb nightmare attack is not an instant kill.