Heh, I don't think it was the lack of settlers that killed Kohan 2 . They changed a lot of things.
As for Elemental lore, well, not much is exactly set in stone yet. Ignoring an idea because "that's what Elemental lore says" is pretty silly at this point. Having pockets of people eeking out a living hardly goes against the theme of a devestated planet.
The neutral cities sound good. My real point is a drive to make cities unique or locations unique. GalCivII went this way a little bit with their specialized squares. It gave you a reason to specialize a planet. I'm thinking a little more than that though. In Warlords, you had several towns that could produce light infantry. One town though produced kick ass light infantry because they were warrior monks as I recall. They weren't any cheaper, but had better combat abilities. Another town might product the same unit cheaper. Some towns couldn't produce some units at all.
I'd love to see some sort of regional variance. If you found a coastal town, or take one over, yea, you can build boats, but are these guys from a long viking warrior tradition or a fishing village tradition? Do they excel in building war boats or in producing food (via fishing) or transports? Do those mountain people excel at tracking in a way that the plains people never could?
Read most any fantasy novel with battles and you have semi-classic "this country is renowned for X". That's what I'm looking for. Do I need calvary? I don't want an abstract Civ IV "I have a horse so I can build cavalry anywhere" type system. I want one that gives some strategic value to an area of land. Hardy mountain folk, fast horse men/archers, etc. I want to take that area so I can have some of those types of units produced in that region.
How that gets accomplished is much less of a concern, whether by neutral civs, or a city "unique attribute" assigned at game creation to anything built in a certain area, or maybe a hero arrives and is willing to train a certain city on how to build warships. I want to conquer a moderately believable world . One where the human city on one edge of the world isn't just a generic "Human" city like every other single human city on the map.
Does that make sense?