It seems to me that there is room for more complexity with how cities are handled. First off, cities that are created should be keyed to the race, and seperately the faction, of the faction that created them. There should be positive and negative versions of the unrest trait, approval and actual unrest. Approval should apply to cities which are under the control of the faction that created them. Approval operates similar to Unrest, except that approval can go over 100% approval, in which case approval over 100% creates a bonus to production, Gildar, and research. Unit production costs in Fortress cities have a bonus based on how far above 100% approval is, and a Morale Bonus statistic is added to units trained in Fortress cities with Approval over 100%. This adds a percentage bonus for every percent over 100 to the trained unit that improves Spell Resistance and Accuracy by that percentage, and also grants a similar percentage chance to resist Fear effects if the original Spell Resistance role for that unit fails.
Conquered cities are an entirely different matter. When a city is conquered by a different race and/or faction, certain factors apply separately, because of custom faction creation. The negative unrest statistic comes back into play. Races have a certain degree of racial animus toward other races, regardless of faction. For example, an faction based on the race of Men that captures a city based on the Wraith race, and vice versa, will have double the normal unrest penalties based on racial animus, on top of the normal penalty for a conquered city. Tarth race cities captured by a faction based on the Mancers have two and a half the normal unrest rate, and if the faction involved is the actual Capitar faction, three times. (Old hatreds still burn brightly.) Kingdom and Empire based factions, respectively, impose an extra 10% unrest penalty on top of all others on each other's captured cities. Captured cities whose unrest goes over 100% unrest have a percentage chance equal to 10% per percentage point over 100 to generate two Rebel units. This consumes 10 population and creates a Spearman and Bowman unit each having the Race and faction traits of the captured city. If there are no enemy units stationed in the city, the rebellion is automatically successful, the city returns to the control of the original faction, the positive Approval trait returns, and the rebel units remain behind stationed as trained units in the city converted into Patriots with the Patriot trait (15% bonus to accuracy and spell resistance). However, these units will not leave the city, and will supplement the defending forces should the city be attacked again. While they have a food maintenance cost, they do not charge Wages, and unlike standard city defenders, can actually gain and retain experience. and improve their level and abilities accordingly.
Unit production in captured cities work differently. The race of the city, not the conquering faction, determines which units are produced. Units built in conquered cities have a gildar as well as production and population cost (conquered races don't serve their conquerors without financial inducement) and have the Mercenary template (double the Wages cost). In the case of cities captured by factions based on the Quendar race, Kingdom based factions cities will not serve willingly for any inducement, and any units trained will be considered Enslaved, with doubled population production costs and the Enslaved template added for that race's (which has double the Slave trait penalties, but otherwise have the normal Slave trait, half food maintenance cost and cost no Wages). Other captured Empire faction based races can be trained in cities conquered by the Quendar as Mercenaries, as noted above.
Undead race factions should be a special case regarding cities. When an Undead city is first created its unrest is locked at an Unrest rate of 0%, and never changes to Approval. Strategic spells that normally affect Unrest have no effect on Undead cities. Food, Gildar, and Unrest buildings cannot be built, nor can resources based on these be built upon. The first two the Undead have no need of either (since Undead units do not use either Food or Wages to maintain). An Undead race can still capture gold in battle and sell items to generate Gildar for negotiations with other races. Only Champions with the Undead template with join Undead factions, and have no Food or Wages cost. Undead races may NOT form Economic or Trade treaties with living factions to generate Gildar, but may still pay for Non Agression, Research, and Allilance treaties if they can find enough gildar to do so. Further, Undead based factions cannot purchase items directly. Instead, they generate them though the production queue, they have a production cost in the case of mundane items, and a production AND crystal cost in the case of magical items. Once the item is completed, one such item is deposited in an Armory holding place and can be picked up at your convenience by the sovereign unit, or any Champion.
When a city of Men or Fallen is captured by the Undead, it has its status changed to Unrest, locked in at 100%, and thus produces only mana from shards. Furthermore, the city steadily loses population as the population starves to death (20 per season). Further, citizens of the race active flee the city (another 20 per season) and increase the population of the nearest city of that Race type by the same amount. Units cannot be normally trained in such cities captured by the Undead, nor will population improve in the usual way. However, when a city is captured by the Undead, a Temple of Undeath improvement is generated 10 turns after capture, less 1 turn for every unit of the conquering faction present, to a minimum of 1 turn (as the maximum number of units that can be stationed in a city is nine.) Every season after the improvement is completed, 1 Undead Militia unit and 10 (undead) population are created there. The units cannot leave the city, but will guard it against attackers, and unlike normal city defenders, can accumulate experience in battle and gain levels. When the number of undead population is equal to or exceeds the remaining human population, unrest becomes locked at 0%, the city race type changes to Undead, and city production as to growth, research, mana production, unit training, and item production returns to normal for an Undead city.
When the reverse happens, something interesting happens. Status is Unrest locked at 0%, but nothing is produced except mana from mana resources, and the population does not change. There are no city defenders, and units from the conquering faction must be present to prevent the city from being recaptured by the Undead or captured again by an entirely different faction. This state of stalemate can continue indefinitely. However, there ARE options to resolve it. The easiest, of course, is the raze the city (but then all attached resource structures are lost). Factions whose sovereign has Life spell books can cast (at Disciple level) the Lifeforce Node spell (cost 50 mana) on the strategic map as a city enchantment, if an essence slot is available. This spell causes 50 undead population to be converted into 25 population of the Faction's race each season., restoring normal food, gildar, growth, improvement production, mana and research generation, , with an effective unrest rate proportional to the remaining Undead population. When ALL Undead population are gone, the Approval trait returns as normal, and normal unit training is again possible. As an added bonus, if the Lifeforce Node spell is left in place, growth rate and stationed unit healing is doubled.
Faster solutions are available for more powerful Life Spellcasters that have the available Mana. Those at Mage level can cast the Close the Tomb strategic map spell, at a mana cost equal to half the total population of Undead. This causes all Undead population to return to their graves, which converts the city's Race to that of the conquering faction with a Population of two, restoring status to Approval, and restoring normal city functions. For those of Arch Mage status, the strategic spell Breath of Life, with a mana cost equal to the total population of Undead, will return the entire population to life, which causes the city's race type to shift to that of the conquering faction, converts the Undead population into that of the conquering faction, Approval status is regained, and all city functions return to normal. As an added bonus for the high mana expenditure of this route, any new units trained in this city have a resistance to Cold and Death effects of +50%, and are immune to fear effects.
A rather long and involved treatise I know. I'm not sure if any of this is feasible or even implementable, but hopefully it will provide food for thought for any Stardock staff and modders that happen to read though it. God bless.