Every so often units will randomly disappear, sometimes leaving city blocks without someone watching them so the buildings degrade. Is this due to having too many units on the map?

yeah it happens a lot especially when the 2nd wave starts
there is a cap on teh number of units that teh map can have at a time sadly

There is a limit over the whole map on the max number of units it can have, regardless of what those units are. If you have the housing but every unit is at max capacity yet you aren't getting more units you might need to muster and attack some outstanding monsters that you can see.