A basic set of choices like that seems a very good idea (it's kind of missing in GalCiv2, other than being able to destroy a colony after capturing it, and that's in mgmt UI not the invasion UI).

Whether you're human or Fallen should affect the consequences of your choice, but maybe not the choices themselves.

Revolts should be a possibility.  A razed city would produce independent militia (not very strong, but would try to raid and avoid direct conflict)  Slim chance of a hero popping up from the razing, which would be a pain in the arse.

A looted or migrated city would produce some revolters as well.

I've never liked the magic conversion on take over games.  Wiping it out and starting over, including just cleansing the populace and leaving structures in tact, that I like.  Going on pillaging raids with an army that can't hope to hold it, that I really like, raiding gets ignored way too often in strategy games.  However, if you can just raze the place, raiding it is... subpar.  Make the damage dealt take time and you cure the problem.  Razing a large city with a small army should take weeks and have massive casualties from fighting the populace who's houses you're setting fire to.  Stealing the stores wouldn't be particularly hard.

If we're going to do magic take-overs, I want appropriate modifiers to the quality.  If men and fallen are incompatible, genocide or forced enslavement is the appropriate modifier when one takes over the other.

I like this idea, however I would have though that migration (or more accuratly called ethnic cleansing) should have a much large chance of a revolt and some pretty nasty diplomatic effects. People fight most hard when they have nothing left to lose, and it also makes a wonderful excuse for any foreign emporer who wants a "just war".

Human vs Human city:

1. Raid it: You get to select which improvements/resources from that city destroy for the current local currency, broken morale in the city for a few turns as well as no production of any kind, possible tech theft. Lose some diplomacy points with every neighbour kingdom.
2. Take it: You get to select which improvements/resources from that city destroy for the current local currency (that you own it doesn't mean you cannot take down parts of it you don't want when you are settling there), broken morale in the city for a few turns as well as no production of any kind, possible tech theft. Lose some more diplomacy points with the Kingdom attacked and some with any allies/friends of that Kingdom. Depending of kind of human (and some cultural effects), probability of revolt during some turns that could be prevented by military forces and/or bribery to the city (taking some money from your vault to buy some peace for some turns). To face cultural enemies, migration from a near city could be possible to reduce that threat in the new city (and increasing its population at the same time).
3. Burn it down: You get some current local currency, possible tech theft. Lose some more diplomacy points with the Empire/kingdom attacked qand their allies/friends.  Lose some diplomacy points with the rest of neighbours.

Fallen vs Fallen city:

1. Raid it: You get to select which improvements/resources from that city destroy for the current local currency, broken morale in the city for a few turns as well as no production of any kind, possible tech theft. Lose some diplomacy points with every neighbour Empire (for being too weak to take and hold the city? Unless you are that kind of evil raider...).
2. Take it: You get to select which improvements/resources from that city destroy for the current local currency (that you own it doesn't mean you cannot take down parts of it you don't want when you are settling there), broken morale in the city for a few turns as well as no production of any kind, possible tech theft. Lose some diplomacy points with the Empire attacked and some with any allies/friends of that Empire. Gain some diplomacy points with the other neighbours. Depending of kind of Fallen (and some cultural effects), probability of revolt during some turns that could be prevented by military forces and/or bribery to the city (taking some money from your vault to buy some peace for some turns). To face cultural enemies, migration from a near city could be possible to reduce that threat in the new city (and increasing its population at the same time).
3. Burn it down: You get some current local currency, possible tech theft. Lose some diplomacy points with the Empire attacked, their allies/friends and with the rest of neighbours  (for being too weak to take and hold the city? Unless you are that kind of evil destroyer...).

Those two cases suppose no neighbours of the opposite race, of course.

Fallen vs Human or Human vs Fallen would be similar (loses and gains of diplomacy points varying according to race and political position) with an important difference: they cannot tolerate each other's population. Cleansing and repopulation are obligued when taking the city (which would take many turns and other costs asociated) unless that city is given some kind of vassal city condition. Unless Frogboy declares that Fallen can work under human dominion and viceversa, I'm going to suppose that in the end vassal cities or racial extermination are the only ways to go for those people (to avoid strange balance problems? because of in character stuff?). Also, vassal cities are cool.

Population cleansing would cause revolt probability in vassal cities of the race that you were cleansing.

My two copper coins.

I don't know about you, but I would like to be able to keep the town. It doesn't have to be the best option in all cases. I don't like the idea of total genocide just because the conquourer is a different race (or species) than the conquoured.

Maybe the town might require some special improvements like a "Re-education Center" to teach the Fallen about morals, laws, and civilization. The Fallen might in turn use a "Slave Trading Center" to put those weak humans to good use.

I think Master of Orion 2 handled captured populaces pretty well.  When you conquered cities of another race or empire, you would have the option to systematically exterminate them over a number of turns based on the population size or keep them as slaves (who work less hard) until they begin to assimilate them.  Certain government forms, like Democracy, would prohibit you from exterminating.  If you exterminated, you would cart in your own citizens.  If you kept the old population, they would gradually assimilate into your empire at a rate depending on how benevolent you are, government type, etc. 

The interesting part about Master of Orion 2 was that the race that you captured would retain all of its natural attributes, even after you assimilate them.  For instance, if your own race was good at research and commerce, you could enthrall other races that were capable manufacturers or soldiers.  You could even cart around your citizens of different races to different planets, if, for instance, you had a thrall race that could tolerate radioactive or toxic environments.  I realize that there are (unfortunately) only 2 races in Elemental, so that second element of this post won't be very viable, but the first segment should be perfectly plausible to implement.