I wouldn’t mind seeing some expensive, very strong breeds of dogs, but I don’t think they should be the norm. Having one really amazing dog in your army would be nice, though, and maybe they should get better the more they kill things. Not sure.
Concerning goblins: I use them as distractions against goblins to keep them attacking the dogs instead of my troops, OR to keep them from running away so my troops can reach them. Simply put, if a goblin ambusher is attacking a dog, he’s not shooting your men, and he’s not running away. That means he’s easier to engage with and make a non-threat I.E. a corpse.
I tend to be a little stingy and careful with armored dogs, but I’m more than happy to waste the lives of non-armored hounds just to be certain that my Battle Brothers themselves survive. They’re also useful to fill in gaps and totally encircle dangerous enemies, giving your Battle Brothers a to-hit bonus against them.
That said, I don’t use dogs all that often right now, at least not in the early and mid game, though I keep a few in my inventory and pull them out when fighting goblins. The strain on my Brothers’ fatigue and initiative is really the most detrimental thing about using them. I think they’d be better if the fatigue/initiative loss wasn’t as huge.