the problem, as i say in every thread, is the way population grows and income is generated.
if population growth for your faction as a whole was determined predominantly by the food available per person, and merchants generated 0.05 gildar per person or whatever, then the best way to play the game would be to build small villages to control resources (such as food) but only build the capacity for population to grow (houses) in big cities. that way you keep most of your population in the places where you have the infrastructure to exploit them.
the result of this is that you can use pioneers to grab resources without getting settlement spam. just one or two biggish cities per faction for making the things that people make (gildar from trade adn taxes, troops, materials in workshops), and small villages to control the things that are produced by the world (metal, food, gildar from mining).
this keeps the map unclutterred, micro-management minimal and the whole thing intuitive and believable. best of all it helps the flow of play, because the settlements on people's borders are less important than the cities at their heart, so losing factions remain competetive for longer.