Strangely reminds me of ye old Starcraft methodology.  You could choose between out macromanaging your opponent or out micromanaging him instead.  This would be determined on all players skill balance and the situation.  Unfortunately Starcraft 2 appears to have introduced some very halfhazard mechanics that fall far short of the original and have little appeal in general.

Since I was a hardcore Starcraft MPer back in the day (where do you think I got this username, eh?) it's not shocking that I think of time as a valuable resource that can be used to force people into making rough decisions.

I do really want to push the idea that the population should never ever ever ever ever be a faceless set of numbers whose sole purpose is generating resources. At the very least they should be ready and willing to riot and rebel, or take up arms against invaders. At best, a system along the lines of Colonization should be used, where every job has a skill set that requires training or a willingness on the part of the player to accept sub-par returns.

There is another advantage that I skipped over to reduce the size of my OP: semi-realistic population concentration. In Colonization, it simply made more sense to focus the majority of your dudes into a small number of highly productive cities, with a bunch of small feeder towns established nearby to provide them with the raw materials and food they needed to be effective. So rather than every city blowing up like a balloon, you'd get megalopolises surrounded by teeny cities. 

Uneven population distribution plays into another essential fantasy game concept: the frontier. In games like Civ4, there is a tendency for Civilizations to start shouldering into one another, with no empty space left between them. Mods like FfH2 attempt to maintain the "empty space" between civilizations for the wild things to roam about and cause havoc in -- through random destruction via armageddon, disincentives to oversettlement, and aggressively dangerous wandermobs. Frontiers are important places in fantasy, as they're the places adventurers go to find loot and beat up scawwy monsters. But they also have value in game terms, as they're the primary drivers of early game conflict, when enemy cities are too well protected for your utterly inadequate military machine to engage them.

So, to recap, individualized populations aid in maintaining the frontier and adding personality to cities and towns, as well as providing a more realistic population distribution. They also encourage the development of a more complex market system with greater variety of goods and equipment, since they themselves pretty much require specialization -- not much point in having lots of farmers to move around. 

well, the population could injur a semi-random number of occupying soldiers each turn of non-stable occupation, which can potentially lead to soldier deaths (although hopefully not killing off unique soldiers and high-level platoons).