The point of a living world is to have a game that does not totally revolve around the player - the player can influence it, or leave it alone. Most games aren't like that - you'll have the leaders of the various factions, and that's it. Stuff happens because one or more leaders/factions make them happen. This is the same as having a machine that, in and of itself, does nothing but can be tweaked and moved and adjusted by the various players. The machine itself just sits there and looks pretty.
In a living world, the machine moves and functions on its own. Things happen that aren't within the player's control, or any player's control. For example, after a particularly harsh winter, a troll cave finds itself lacking enough food. This cave happens to be right outside your lush, green, easily farmable territory. So the trolls are then told something along the lines of this..."You have X food, you need 2X food. Thus, go find the missing X." The trolls leave, some wander into your territory, find the remaining X food, and takes it back to their cave. It happens, not because the player decided to make it happen, but because it was necessary for the trolls to survive.
THAT is what would make Elemental even better. The trolls had a need, and they acted upon it. Now that can easily start a chain reaction...say they took food from an area that normally goblins use for food. Now you have X less food, after a harsh winter - the goblins will seek to find the food they need. They come across the trolls with lots of food. As they've been told to get food, they try to take it. The trolls resist. War between the trolls and goblins begins - all of this happening while the player was doing something else.
I don't think it has to be hard to implement, either. Someone - I can't remember who right now - made a comment earlier about giving each lair a radius. If each lair also had a 'food requirement' then as long as there is enough food in the radius, the lair dwellers will be content. Events like a harsh winter (reducing the kingdom's food) will lessen the amount in the radius. Since the radius can't have enough food, the lair dwellers are told "get out of here and get some food!" and they do just that, by whatever means.
But now, back to the goblin-troll war. Imagine yourself 5 turns later, with a small group of scouts patrolling near the lairs. They come upon a battle, with the goblins on one side and the trolls on the other. You have no idea what's causing the conflict, but there they are, duking it out. And now you have several options...
Help one side - killing the goblins or the trolls, the hated enemy of one group, could have a benefit. Say I kill all of the goblins. As the trolls hate the goblins too, each dead goblin raises their disposition to my faction by a small amount, and eradicating them all puts me at a nice level. So I wander near the trolls, a troll elder walks up to me and says, "Hey, we like you now, but we still need X food. If you help us get X food, you'll be our friend." You give them food, and now you are friends with a cave of trolls.
Stand by - One side will wipe out the other, or it'll be an eternal stalemate. Whichever it is, there are options from here...if the trolls win, then you - the Sovereign - suddenly have a cave of hungry, battle-hardened trolls. Or perhaps the battles with the goblins were so difficult that only a handful of trolls remain, their lair radius is reduced and their food requirements for survival are also reduced (to compensate for less trolls)
Erase both - Kill them both off, and take the lands for yourself.
Now think about that happening your first game. Come the next game, both factions (conveniently at the same location) need food again, so they team up to take food from you. The game after that, the goblins randomly wandered into another direction looking for food, and team up with that goblin tribe on the other side of the mountains, wipe out the trolls, find another tribe, and now you have a bunch of goblins in control of a pretty large area, all of them wanting food, and all them them wanting to take it from you.
Then comes that band of adventurers, who take down one lair and conveniently buy your troops enough time to fend off the other two (because two goblins tribes are not as powerful as three). You look at the adventurers, offer them permanent jobs (or whatever you can do to reward them) and now you have new champions leading your armies against the goblin menace.
You can kill them all off, but perhaps your armies are too weakened to finish the goblins. You go back, lick your wounds, and get to prepare to finish the goblins off some day down the road, while they rebuild their own armies. Maybe you get distracted and, twenty turns later, the goblins wipe a city off the face of the map. Or perhaps instead your troops meet them and end the battle twenty turns later, then, because you're stronger, go to finish off the goblins.
Tell me THAT would not be an epic game.
