Get rid of it entirely, waste of time. Unless there's a gameplay element to placing city tiles (which I doubt I'd want to deal with, given the number of cities you potentially have to manage), it currently serves no useful purpose.
There are also some stupid, exploitish behaviors with city spread right now, as units can travel through an entire lengthy city in one turn (but not if the city is full, and cities can engulf resources, which then use the cities build queue, instead of their own). It's a buggy mess.
Nooooooo. That's a horrid idea, I'm sorry but I don't agree. I see taking it out as taking away a whole level of detail from the game. For those of us who like it, it's there. For those who don't, it doesn't matter and you can put a building anywhere without consequence because it really doesn't matter what building is next to which.
I do agree of course that any abuse or bugs in it should be fixed, but scrapping the concept is really uncalled for when so many people enjoy it. Why do you think so many people want the Dynasty System back? Because it was another layer of detail, of depth, that made the game fun (to those who enjoyed it).
FE is really Elemental with OOMPH. A new UI, better presentation, better combat mechanics, better just about everything that's present in the game. Now what it needs is to have that same "FE Treatment/Upgrade" applied to the City Building system and the Dynasty System and then we'll have what I think most of us would consider a complete package, combining much of the original intent of Elemental with the awesomeness that is FE.