http://warlight.net/ViewHelp.aspx?s=LuckModifier
I questioned precisely how this works also.. and believe dukes math is slightly off as well

0% luck = 4.2 armies killed...

100% luck = IF(Rand()>=.6,1,0) repeated 7 times, armies killed...

any other factor of luck = (100% luck result-4.2)*(luck percentage)+0% luck percentage

so in the off chance you get 7 kills with 100% luck it would be..

(7-4.2)=2.8

2.8*.16=0.448

4.2+0.448=4.648 = highest possible kill result

and the furthest ranges have a much lower chance of occurring, as it is similar to playing a game of dice...

you have 7 rolls, the odds of 7 successes or 7 failures is much less then the chances of 3-4 successes...