That would be 45 cities each which is about medium small to me in a game like this depending on land mass available. Hell, 120 cities each is probably laughable on some maps you need to remember there is going to be a 64-bit version. I also disagree with your assertion that dragons depending on the size of an army would be irrelevant for two main reasons. First the power level of a dragon could scale dynamically based on map size or some other variable. Second and perhaps most logically if you put in the time, effort, and resources to get a dragon I wouldn’t send him off alone to face the enemy no matter how powerful he was. Even the most powerful weapon system (or in this case creature) need full support form traditional forces.
Ah I misunderstood. Nonetheless 45 cities is huge. I always play on the biggest map sizes available in these types of games, but even in Civ IV, 45 cities is huge. At that point corruption makes cities so inefficient that they stop being worth settling... (I actually hope there's no corruption-like system in Elemental, it always pissed me off no matter how realistic it might be
). And in AoW, 45 cities would be absolutely ludicrous... Personally I hope cities are more important in Elemental than they tend to be in most 4X games. I'd be disappointed if a regular grid of cities covering the entire landscape is a common sight. For me, that would ruin the fantasy feel.
And I never suggested sending the dragon into battle alone. But if both players' armies are 15,000-strong, but Player A also has a dragon, then Player A will have an advantage but not necessarily an insurmountable one. On the other hand if the army sizes were just 2000-strong, then the player with the dragon would probably have a field day. I'm not sure how I'd feel about dragon strength scaling with map size. It could be okay, but it could be excessive. It would be cool if there could be a "dragon strength" slider in the options 
I would be tremendously disappointed in the magic creature system if some significant level of input was not required to gain their allegiance.
So would I, for the most part. Unless you and the dragon have a common, priority goal, you should have to do quite a bit to get the dragon to join you, which could come in the form of quests. The quest could require a significant input of resources, but it doesn't have to - it should depend. I hope that SD doesn't do the stereotypical gold-hoarding dragons - personally I think it belittles them. Now if some dragons like their gold, that's one thing, but the priorities of dragons should be varied. And even if you and the dragon have lots of shared goals/ideals/enemies, it doesn't mean the dragon will automatically join you, but the process could be a little easier, or there could be a chance that the dragon won't take kindly to your offer despite the common grounds.
I also doubt threatening the dragon would be an intelligent move no matter how powerful you are plus that would just be lame.
Why? If your channeler alone is powerful enough to kill a dragon all by himself with minimal effort, then why would threatening it be unintelligent? A dragon that's been forced into serving you should have a chance to go rogue and turn against you, though, so it would be a risk. Plus it could make all other dragons think less of you.