This is one of my pet pursuits -- small but puissant kingdoms being competitive, using magic to offset size. There was a lot of discussion of this goal pre- and during beta.
Release took a big step back from this, removing the increasing cost per city constraint on city-spamming. No explanation for it, either (I've looked, did I miss it? Please to link or point me in the direction if so).
Still, in both 1.06 and now 1.07 I've been trying this strategy. Large map, 5 fallen foes, second-hardest difficulty. Trying to maximize champion recruitment and imbuing, then using summoned critters, instead of recruiting normal units.
So far modest success, but there are significant obstacles. Basically, it's a numbers game -- the more cities, the more buildings to add technology and spell research points, gold income, materials, etc. Without numbers, research is slow, gold is scarce, and it's hard to afford champs. On the other hand, not having a lot of cities reduces gold/materials needed for buildings. And frankly, there's only a few spells worth researching (a long range tac spell like lightning, and an AoE tac spell like chain lightning, then the strategic summoning spells, and a few city-buffing spells), so the need for a lot of spell research points is minimized. Same for tech research points too. (I'm viewing the lack of useful spells as a plus here
)
In my current 1.07 game I restarted ~10 times and got a great starting location -- gold mine (and a second appeared not too long after), lost library, and a fertile lands (with a second in city lvl 4 range). First wandering champ was a female (Sov is male) with the dominate trait (hugely powerful, and passes on to female progeny). A second city nearby has a beehive, oasis, orchard, lost library, and close by a refugee camp and an ore mine.
That's an exceptionally great start, and has enabled a small empire attempt. It shouldn't be necessary to have such a great start for this strategy to be viable.
If brad doesn't want a 'small empire' strategy to be viable and if city-spamming isn't intended to be a main part of a viable strategy, then I wish he'd say so. Otherwise, there's some work to be done to enable it.