I think that it definitely can. Even the large mass effects spells can used if given some thought on how to limit/balance the effects. Although you specifically said fantasy, not sci-fi, the first game that comes to mind for large scale magic is Epic 40k – 2nd edition. There were a wide variety of science-fantasy weapons and spells that could be used with subtle or devastating effects. There were lots of ways to rapidly redeploy troops (Warp gates, teleportation, deepstrikes/flight, storms), mass damage (death strike missiles, warp missiles, orbital barrages), troop buffs/debuffs, ways change terrain etc. Lots of creative ideas in a system that was lots of fun to play and pretty popular.
For OHW it’s obviously going to be a lot different, but your ideas for magic seem good. To me, a big part of OHW is working with the random force selection and given scenario terrain to create tactical solutions. Lots of ways of you could handle it, some ideas:
Let magic influence unit types: Since all units take the same amount of damage to destroy them, add a Wizard unit to the random force table with the stats of Levy, but the ability to temporarily change their abilities or a nearby unit’s to any of the other units for a turn (e.g. knights would become skirmishers or archers for a turn or vice versa). That could simulate using magic in a number of ways, adding tactical options without changing game mechanics too much. You could randomly limit the number of time the unit casts per game and not give the opponent foreknowledge of the number of spells.
Let magic alter pre-game set-up: You could add Magic to the pre-game letting scenarios with wizards alter terrain or forces, perhaps create a magical fog using a screen, change a units type after deployment etc.
Let magic alter the battlefield: You could create half a dozen terrain types following fantasy tropes each with specific effects (lava, ice, quicksand, fire, vines, darkness, poison, mud, sleep/stun, randomly teleportation, confusion etc), some with potentially devastating effects, and let wizards cast them but require the casting to take two turns, so that the enemy has a chance to react between the casting and the effect. This could be fun because your opponent could decide whether to risk the spell effects or try to avoid, and you’d have to think about the best positions strategically. Again, maybe make a Wizard unit with a single type of spell.
Have fun, they are short games so experiment a little!