Nice. ...ähhmm, sry!

I'm in a similar situation---boxed in. Warfare not an issue for me because I haven't found my magical groove yet. I'm fighting to stay ahead so I don't get attacked. I only have one gold mine & $$ is tight. I hear the market improvement does nothing. I usually play with Umber, too. I do  love the darklings. I guess I'll see how this plays out later tonight.

I haven't tried the terraforming magic tree yet, but unless you were in a map corner, as mentioned above, forming a land bridge across to a nearby land mass might be an idea, as long as Magnar isn't attacking.  Entering into a non-agression pact with him so he leaves you alone for 100 turns is an idea, and if you can point him at another player (Gildar bad. Kill The Gildar), so much the better.

Any chance you have a separate save game for earlier in the game, in case you'd like to go back and try something different?

I'm also playing a game where I'm in a peninsula. I've managed to get 4 cities in, and a harbour so I can send out ships a-scouting. I have to trawl through mountains and thick forests to get anywhere (really slowly), but it's given me an opportunity to consolidate my power, and put up a real bottlneck defense for any attacking armies. I'm currently ranked one of the weakest factions, but I'm in a position that affords me some time to remedy that.

My only problem at the moment? Food. I should mention that I'm playing 1.09e though.

Speaking of ships.. How do you get past just the 'transport'? while I've not done much with ocean-faring units.. all I ever see is the transport. but the 'tutorial/quest' has at least one ability (everyone moves at hero's speed) and warfaring-like ships (or at least they seem like it. might just be fancily-named transports

Is actual sea-combat coming?

And yes.. I'd just make the land-bridge, and if you have the mountain making one.. make a hill/mountain wall to lock the guy off form you for a bit

I've NEVER seen an AI use the terraforming spells.