In my polish campaign, my troops would never return to full strength or reinforce their numbers. As a result, 30,000 polish warriors would be defeated by 7,000 prussians. After the battle, only 20,000 poles remained and I had to build new ones in order to get even close to my normal fighting capabliity(and even then they broke almost instantly) Am I doing something wrong, or is it a bug?

In FtG (just like before in EU2) existing armies do not reinforce their numbers automatically.
You have to raise new units to create new armies and merge them with the existing armies if you want old armies to keep their size.
The major reason for that was that in most of the time of FtG’s timeline there were no standing armies but units were raised according to need.

Newly recruited troops start with low morale. Morale then raises over time until they have reached full morale (but only if you pay full maintenance for your armies).
Morale means that a small army with full morale can easily defeat a large army with low morale because fighting and taking losses lowers morale and the army that first has no morale breaks and runs away.