Here's a half-baked idea that might satisfy those (including me) who have pondered the idea of Outposts. I write this with the caveat that I have not crunched the numbers to make sure it is balanced, but I believe it can be fine-tuned...

Outposts are a lower class of city, with these limitations:

Settlers will be able to embark on two types of mission:

• Settle Town (as we currently have), and
• a new option, Settle Outpost.

The number of settlers required will increase with the number of (Towns + Outposts), so it will eventually become infeasible to have too many Outposts. It also becomes more difficult to settle new towns if you have Outposts, and vice versa.

Note that we might need other limits, to present economic, as well as time interval limitations on the creation of Outposts.

Yes, but only with the following:

Same as a city, but much less capable. You could create small armies, diplomatic missions, gathering activities, trade valuable items, and manufacture advanced resources — all within the limits afforded by the level cap on buildings.

That would be difficult. There are no defensive walls, and if many players stack their armies on a tile (home-grown at the outpost, or reinforced from a town), they are vulnerable to a single large attack. Think how difficult it is to defend tournament squares.

With the limitations on existing game mechanics, this allow more varied interactions, while remaining balanced and making better use of the other game assets. I would find it Interesting™. Would you?

I'm even thinking that 12 free building plots is generous. Perhaps even 8 free building plots is sensible, along with an expensive building that increases your level limit by 1 (while of course using up a building plot!). This gives you 8 buildings at level 10, or 7 buildings at level 11, ... or 4 buildings at Level 14, and so on.

By soft limit, I mean that it costs too much to maintain or create a high number, e.g. has anyone managed to use 20 traders?

Sure, assembling 11, 12, 13, 14... settlers per outpost might be a little limiting, but I don't think it's limiting enough. I'd want something that, say, makes it difficult to casually run more than 10 outposts plus 10 cities without specialisation, and impossible to run more than 16 outposts plus 10 cities.

I'm not sure what would provide the maintenance costs. Perhaps a running cost of 2-gold penalty per head of outpost population, applied to the town that sent the mission?

It seems likely that people would use these "outposts" mainly for the purposes of crafting -- if crafting is possible in an outpost?  How do outposts get research done? -- and gathering.  Someone would create an outpost (or 10) with zillions of cotters and harass their neighbors for miles around.

Maybe this sounds fun to some people, but to me it mostly sounds tiresome.

With broken lands I can have 20 cities, why would I want an additional 20 half-cities?  If we wanted to go that route I would say just make the new maximum number of cities 15 per continent.  

I think there is fun to be had, but if it is outweighed by the inconvenience of mindless clicking, then on balance it wouldn't work.

Edit: Added Magic and crafting.