Slitherine

It seemed like Prayer was vastly overpowered both when I used it and when it was used against me. I didn't recall there being a de-buff in Classic. So I looked it up and sure enough, there was a de-buff in the original game, but it was removed in unofficial patches because it was a bug.

From the wiki: https://masterofmagic.fandom.com/wiki/Prayer

While Prayer is in effect, each and every enemy unit on the battlefield receives a -10% To Hit malus to their Melee Attacks. That is, every time they perform such an attack against a unit affected by Prayer, including during Counter Attacks, the success chance of each die of their Attack Roll is reduced by 10%. While this does not affect their potential damage, it does decrease their average "raw" Melee Damage output by an amount proportionate to their Melee Strength. Other Attack Types are not affected.

It should be noted that this effect is removed from the game starting with the unofficial Insecticide patch. Examination of the game code has led multiple patch-makers to the conclusion that this is actually not an intentional benefit. It is most likely left over from an earlier stage of the game development, where Melee Attacks were handled differently from other Conventional Damage types (hence why the effect only triggers for Melee Damage).

Having this included makes Prayer way, way OP, especially considering that it is only Uncommon and cheap to cast. I had a stack of Paladins defeated by stack of Regular Gnoll spearmen, except I had a single figure of a single unit left, because the AI had Prayer in effect. That was essentially the only thing they had going for them. So, Spearmen with Prayer can defeat Paladins. Come on. I've been playing 1.5 for years and Prayer is very good in that, but its not like this. This is crazy. The debuff should be removed.

As noted in the comments section of the page you linked, there's a quote from the Strategy Guide:

Note, that in addition to increasing the target unit's abilities To Hit, High Prayer, Prayer, and Luck are like Invisibility in that they also decrease enemy units' To Hit abilities by one.

I'm not sure why/how the patch-makers came to the conclusion that this was a bug, as it works the same way for three different abilities.

Was this fight run with auto-combat or the familiar? I know the AI doesn't do as good a job with tactical positioning. Where there any other buffs/debuffs/spells going on?

The trick with paladins is to make sure they're the ones attacking, making use of their first strike ability.

No, I did it myself and got first strike almost all the time.

The problem is the combo of both +1 to defense and -1 to hit results in a huge differential that makes doing damage almost impossible. Consider that Warp Reality grants -20% to hit on non-Chaos units and that's a Rare spell and costs 50 mana to cast. Now I would say that this implementation of Prayer is much more powerful than Warp Reality for 15 less mana and a whole spell tear sooner.

This does bring up an interesting point. If playing Life + Chaos, a la Sss'Ra you could cast both Prayer and Warp Reality and be unhittable enemy to hit % would go down to 0% for most units.