City's can only be built 7 squares apart, but this is not based on the centre of the city, but the edge, so two new city's can be 7 squares apart, but once they get bigger, they are now classed as closer together then 7 and destroying one will not allow you to rebuild it until the other city's building have been reduced.
Also the SLAVE MASTER trait and higher AI levels, means computer city's have more base grain then that is really there!
I have been playing on ridiculous level and the AI start with 15000 gold, 300 materials and 300 crystals and their city's have double the grain and metal (so if the land is really 4 grain, they show up at having 8 grain)
It make the game a lot more fun 