Almost same here. I'm playing my Umber campaign (Wildlands map). First Emperor Karavox captured the city and hold it for at least 50 turns. The quest didn't end and the green zone didn't disappear. Heck, I said to myself, maybe when I conquer the darned wildling city, this nonsense will end, so when opportunity had arisen I conquered the city for myself. Again the quest didn't end and the green zone didn't disappear. I remember reporting the same bug back in 1.004. Apparently it's still here.
Interesting. I noticed this problem in previous iterations - it appears the wildlands was crocked. In my most recent game, however (v 1.3), not only was the city finally defended (albeit with a single darkling mob - can you say "bowling for darklings"?), but once captured it became a very nice 4 essence !! city and leveled up nicely (made mine a conclave). I didn't even have to clear all the stupid lairs. Borders expanded like any other ville when the city leveled up (or with a monument), and I was able to build pretty much all the improvements of a normal conclave. Admittedly, it is still the "wimpiest" of the wildlands. If this is the cultural center and capital of the darklings, it should be heavily defended - sort of like Imperium. Maybe even special darkling units (super shaman, or something) Defintely needs some work still. The mobs I hadn't cleared previously did try and attack it repeatedly, but once they were gone, it acted like just another town. This was early "mid"-game.
