My apologies. While I haven't played the LotR TCGs, I have played Magic, and in that, the opponent gets to select what defends what. Of course Characters in Magic also heal fully at the end of each turn. I'll have to look at the LotR TCG to see how that differs.
Regardless, I can see how you're viewing the battle phase, but I also understand that different card games handle battles differently. The way IW handles it is that the first blocker takes all the hits till the opponent's attackers have all attacked, or the blocker can't take any more hits (usually from health dropping to 0). Then it moves on to the next blocker and so forth. This, in my opinion, allows a lot of mind games because you have to figure out what order the opponent will block in, and adjust your attackers accordingly, or vice versa.
There is a card that lets your characters fight much like you state in your original post, to a degree. It's Kung Ji (hope I got the right chinese name), Master Strategist. When each defender takes a hit, they move to the back of the line. If there are more attackers than blockers, this may mean that some blockers get hit multiple times, though. Most players seem to view it as a subpar card, especially since there's a few DoD cards that you want to block most, if not all the hits, but he is the only card to provide constant battlefield healing so far.