Ok, so the following has been determined:
[1]Hits must continue to carry over on escorts, as not doing so is a huge buff. Hits will not carry over on capital ships.
[2]Capital ships may be picked out individually by passing a leadership test.
[3]Capital ships may go on BFI individually.
[4]Secondary commanders can strengthen the chain of command by allowing special orders within their squadron to continue if a command check is failed outside the squadron.
I can rewrite the squadrons section to clearly follow the above points. There are still a couple of points of contention:
A: Considering that the logical implications of [3] is that the squadron cannot take special orders as a whole if any ship is braced, I see no reason not to let ships within a squadron go on whatever special orders they want, as doing so eliminates 1 of the three reasons you would form a squadron in the first place, namely squadron leadership and reduced number of command checks.
B: What should the penalties for dropping out of formation be? There are two approaches.
1) Formally define a squadron command ship, any ship not in coherency with a part of the squadron containing the command ship may not take special orders or mass fire.
2) If any ship is not in coherency, then the entire squadron may not mass fire or go on special orders.
C: How should squadron command checks be taken? I think they should remain as is, with a squadron leadership value and one command check for all ships. Sigoroth proposes that only the ships which would normally have passed the single squadron command check if it had applied to them personally should go on special orders - no squadron leadership.