I don't think the magically generated rewards is horrible, however I feel the fact that the losing KD ends up losing nothing is a bad idea.
This might encourage KDs to do the hit-and-run tactic a lot more often. Even with the current 10% honor loss, withdrawing is still a strong viable move.
I warred an orc based KD last and they pulled a max gain wave before withdraw, which easily netted them more than 10% land/honor. We actually came out negative on land, and would have lost honor too if it weren't for the 10% transfer. Consider the same situation with this new proposed change, the withdrawing KD would have ended up gaining more than we did.
I can see the general intent of this change, because yes... currently losing a war is devastating. Dropping 10% honor AND you don't gain the free credits to recover AND you lose out on the free science.
Maybe a better option would have been to offer the losing KD partial rewards. Credits to recover, lesser amount of free science. This still coincides with your intentions to encourage war, without strengthening hit-and-run tactics.
