The caravan system could work very well for a number of reasons.
Lets say town A has a "resource" of bears in the area,making it possible to build bear riders.For example they could cost 120 gold to train and 3 turns to make a unit in that town.
Caravans will make it able to transport the bears resource to a town B (a'la Civilization) but with restrictions,Town B 20 squares away could build bear riders,but because of the cost of travel and transport they will cost 240 gold and take 6 turns to make a unit,the bigger the distance the bigger the cost and time,making it alot harder to train bear riders in town C 60 squares away.
This would also help give a civilisation a "feel" to it and making each game feel different,a town would be well known for training a great number of bear riders,another town may be well known for training large amounts of a certain elite unit etc etc.
Just a basic idea that someone may have come up with before,but it seem's quite easy to impliment something like this with the above formula.