Some thoughts about how things should change in these aspects:

1) Cities that have population drop (by removing housing, etc) should loose land control. If you get to level 5 and it gives you control over 3 more gold mines and you remove those houses, you loose the gold mines.

2) Cities with low prestige next to cities with high prestige should grow more slowly, and if the difference is large, maybe the low prestige cities should even shrink. This would be a good way to compete with neighbor factions as you could use prestige pumping in a city to take over land from your neighbor faction by lowering their population. It adds another dynamic to the play and makes things more challenging and interesting, especially for people who seem to have issues with the war aspect of the game. Negative prestige should definitely make the city shrink.

3) To further eat up population from cities and make prestige more important in the late game, offer larger army sizes by adding a "platoon" recruiting option with 50 units. In the late game, this will help drain population from the cities making the rate at which they grow more important, which means prestige stays important for late game. Otherwise, once a city hits level 5, instead of killing houses, they'll just kill prestige pumping buildings. Of course, #2 helps with that, too.

4) When fighting other factions, when you kill the Sov, a male heir takes over (or, if egalitarian, the oldest child, which makes egalitarian much more useful). If the faction runs out of heirs, the entire faction and all their cities and remaining units fall under your control. Obviously, units summoned by champions that you've killed should disappear upon the champion's death. Remaining units you would gain control over. This means you don't actually have to *grind* through all their freakin cities just to take them over. This makes dynasties more important and adds yet another dynamic to the game making it more interesting and more playable.