I would leave Undead well alone. Black Knights are pretty good but very expensive (1000 each from memory) and Necromancers are useful as well, but I think that's it. Most of the undead units seem rather weak, they cause morale problems and you won't be able to restock them in Demonis.
Go with Demons - Demons, Demonesses, Scoffer Imps, Cerebuses.
