I think that it is primarily a balance issue.
This seems like a more quantitative issue ... however ... you DO have a good qualitative point that most Auto-Upgrades seen thus far have both proto and contemporary forms cost the same amount of resources (Hut, House, Villa).
It is an interesting Qualitative discussion to see how Auto-Upgrades will be handled when the prices of the proto and contemporary forms are significantly different.
For instance, say Markets -> Forums, or Schools->Universities, or Vault -> Bank -> Exchange.
In these cases, it might be better to have a bit more choice, and for the differences in cost to ultimately be paid for by the player. In this case you could have the option of individually upgrading each building, or clicking on a city and say "Upgrade as many of X in this city as we can pay for" or by clicking a domestic button and say "Upgrade as many of X nation wide as we can afford."
With this system, once you discover the technology you first get the pop-up that asks if you want to "Upgrade as many of X nation wide as we can pay for." It should also state how many buildings need upgrading, and how many upgrades the current treasury (+ materials) can pay for at this time.
Under this system, you will probably have the option of building both X and X+1 in new cities ... although some games (like Civ with units) decide to make X obsolete after a certain mile-marker has been reached.
Now, key for this system ... it only relates to buildings that are qualitatively the same in every way, and where the upgraded form is better in every way than its predecessor.
If there are two (or more) possible upgrade paths ... a similar method can be used, however Auto-Upgrade must never be used. Even if Auto-Upgrade is still used for more expensive upgrades of the same caliber, Auto-Upgrade should never be used for buildings with multiple upgrade paths. The idea here is that the building can be "upgraded" via a difference in cost by building one of the new upgrades atop the previous building ... as if it was an expansion project. Then the building will cost exactly X materials less where X was the number of materials used to build the original building.
In this case, lets say a Market can upgrade into either a Forum (direct upgrade) or an Exchange (alt upgrade). If you have a market, you can build either a Forum or an Exchange on top of the market, and you will be discounted by the cost of the market. If you were to build a new Forum however, then you would pay full price.
Another example of alternate upgrades would be if a Town Hall could upgrade into either a Courthouse, a Civil Engineering Office, or a Bureaucratic Lodge (office). The Courthouse would lower maintenance (possibly added commerce), the Civil Engineering Office would either increase housing of local Housing structures or add more buildable squares to the city, and the Bureaucratic Lodge/ Political Office would add (more) prestige and possibly commerce.
Most of these alternatives would at least keep the base 2 prestige of the Town Hall, with perhaps the exception of the Civil Engineering Office.
(As qualitative building suggestions)- the presence of at least one courthouse within a city changes the prestige value of local jailhouses from 0 to 1.
-In the city of the Palace, the presence of each Political Office would add +1 to the Palace's generated prestige (cumulative)
-The presence of at least one Civil Engineering office may (or may not) add +1 prestige (locally) to certain housing improvements ... namely house, villa, (and slums?)-only if slums are still -2 prestige/ below -1 prestige
//Speaking of Slums, they are slightly better now although that is debatable. At -2 prestige the slums *require* a Town Hall, and thus really take up 5 squares. If this is the case, then the Slums should realistically house *MORE* than 5 squares worth of housing. Doesn't have to be even 6 squares worth, just more than 5 villas. On the point of req. 5 squares (with Town Hall) and needing more housing than 5, it doesn't matter how much food it costs as its simple math with relation to prestige. Now, if any 1 square improvement can net more than 4 prestige by itself, then Slums are fine as they are.
