When they first mentioned they would have neutral cities I imagined it more like MoM. They would simply be cities scattered around the map for you to conquer if you wanted. But instead they are actual faction you can conduct diplomacy with. The problem though is they can not grow, their cities are limited if conquered, and they are just in the way.
They should remove the city building limit on Minor faction cities cause most people just wanna raze them as soon as they get them. Next they should have the Minor faction actually build up and expand their city a bit. I think the neutral factions could provide an option for great trading partners. Right now it seems even if they have a ton of something the AI values it's Metal/Crystal/Materials way to much. And yet they give very little value to your own, sometimes it's marked as worthless. These neutral factions could be great sources of trade by having them trade off these goods for a little cheaper then the major factions would.
Besides trade partner they already provide a source of spouses for your children. I know I often prefer to marry one of them cause I don't recall the grand children ever leaving to join the minor faction the way they often do when I marry someone from major faction. They do often provide some cash and tech if you have treaties with them. The problem is the AI likes to wipe them out a lot so often times I find all the minor factions are soon dispatched from the game.
One of the things that made neutral cities so important in MoM was the fact that each city had it's own race which determined the buildings and units it could make. In EWOM though it's determined by your faction at the start. The minor faction's city is little more then a speed bump on your way to greatness. It's in the way because it can't be expanded on (leveled up) and it's often hogging valuable resources. This setup is just begging for you to raze their city.
Personally I think their should be a Diplomatic option to bring an neutral faction into your empire. I think it would also be neat if they each had their own unique building. I think a great example of this is Birth of the Federation. It was a great game when it came to having all the various neutral factions in the game as they all felt kinda unique with their own ships and special building.