Larna,
RE: Alliances - proximity to other members of your alliance is helpful because you can move supplies and troops to each other faster. However, many alliances are very dispersed. The most important aspect of any alliance is how well you get along with the other members. The second most important aspect is how active you and the other members are in Illy. It takes time to learn these things which means that you will likely not remain with your first alliance forever. For this reason, you might wish to reserve your free capital city move until you have a better feel for which alliance you like.
RE: developing a city: resource production and storage are very important to develop in the early phase of a new account. A lot of new players focus on military quickly which I think is a mistake for these reasons: 1) any army a small player can produce and maintain is incapable of doing anything except die and give XP to another player; 2) you do not need the tax load of supporting an army while you are focusing on early city growth; and, 3) smaller players suffer diplo attacks with far greater frequency than army attacks.
Until you are in a position to build and support at least 50 basic thieves, I would not spend resources on diplo defenses.
Your best defense as a small player will be a Rune. This means that the Mage Tower will be your most important building. It is also the most expensive and time consuming to build. Your early goal should be a Death Rune to kill 20 attacking units. Your mid-range goal should be obtaining the Killing Glyph. This will kill 75 units entering your city. And your longer-term goal will be Ward of Destruction which will kill 250 units. Be sure to pay attention to which research path you persue in Magic as you are limited to a single school at first - so you want to research Runes before Geomancy and Blights.
You will also want a Marketplace so you can build Caravans to harvest resources on the map and trade with others.
Good luck and good gaming.
Edited by The_Dude - 24 Mar 2011 at 15:03