I think it would be REALLY funny if one of the magic items you could create (going along with your Ruling Ring LOTR reference) was a set of rings that gave fairly significant bonuses to a Champion(s) who originally starts out as a non-ringmaking race's hero, but has a slight chance (~1% per turn or something like that) of 'corrupting' the Champion to your side - permanently (champion can no longer be traded), so long as your sovereign has the Ruling Ring. You can accept the ring from the faction that made it and get some kind of immediate bonus to the Champion's abilities - perhaps even a permanent Death Ward - but the 'gift' might come back to bite you later on.
I also think that another way to possibly connect the magic tech tree with magic would be to require that at least one Arcane Lab/Lore Hall be built for each level of research that you put into the magic tree - i.e., you are at level 5 in the magic tree and you cannot advance any further into the tree until you have at least 5 Arcane Labs/Lore Halls (other arcane knowledge generating structures should probably count as well, and you could work it so that the more Arcane Labs/Lore Halls/arcane knowledge generators you had, the less worldly knowledge it takes to research the next level of the Magic/Sorcery tree).
The biggest problem that I have with the magic system as it currently stands is that, through the entire game, it is more or less a nice set of supporting abilities that are useful but not particularly game changing or significant. Granted, Heal in the early stages of the game can be ridiculously powerful because you can restore ~half the life of any unit likely to be on the field, and if you have armor that is roughly on par with enemy attack ratings, then it is somewhat unlikely that the enemy is going to be hitting for more than a few points of damage at a time. Empires lack this spell, and it can really hurt their armies' ability to do things early game, since the only way to heal the Fallen troops is to go home and wait a while or push on and replace those who fall.
One thing that I think also needs to be included before a viable wizard sovereign can really come into being is a starting spell that does a bit of damage. It doesn't have to be a very good spell, but it needs to do a couple of points of damage for no more than three or four mana, because otherwise you get back to relying on weapons and armor that your mage king wants to get away from.