100% great idea,
, I love it. Would greatly alleviate many city abuses such as:
On the topic of buildings you can stretch your city far to the side in a stringy snake fashion, you can do this even with squarish late game cities by demolishing buildings on one side and building towards an area. This allows you to basically teleport your units over 5-10 tiles by abusing the city movement.
And really help reduce the tedium of building construction. At late game I feel I am just building everything so I have stuff in the queue, sort of like late game civ games. This would mean less buildings, still lots to fill up the queue (as advanced buildings would logically take longer), and actual choices. Instead of having multiple buildings that give +1 diplomatic capital, or +10 food, you could have buildings that upgrade into +2 DC, or +20 food, and don't have 100 buildings that do similar things to choose from when upgrading your cities. You could also simplify building maint by having tier 1 buildings cost 1 maint, tier 2 cost 2 maint, and tier 3 cost 3 maint, for example. Personally I think FE could use a solid building line like town hall > city council > palace, that does something like reduce maint/unrest. Building construction just seems very unorganized overall.
On the note of upgrading I think that instead of a proper linear tier as you proposed (Granary-->Mill-->Bakery-->Bread District), it would be strategic to have to make choices on level up buildings with benefits and drawbacks. This would help you further specialize your cities and make it so you aren't just upgrading everything. So for example:
(1)Granary which might be +20 food per grain could upgrade to
(2)Mill which would give +30 food per grain, or
(2)Bakery which would give +20 food per grain and +.5 growth.
(2)Mill could then upgrade to
(3)Advanced Mill which gives +40 food per grain, or
(3)Horse Mill which gives +60 food per grain -.5 horse.
(2) Bakery could upgrade to
(3) Bakery District +20 food per grain +1 growth, or
(3) Food Stockpile, +20 food per grain, -25% unit cost/training
So instead of having 50 buildings that give random food bonuses to grain you would have something like the above. For a more interesting example the gildar line could look something like this:
(1) Market + 3 gildar
(2) Barter + 5% taxes, -10% shop prices
(2) Merchant +6 gildar
(2) Barter + 5% taxes, -10% shop prices
(3) Bazaar, -20% shop prices
(3) Tax Collector +10% taxes
(2) Merchant +6 gildar
(3) Trading Post +10% per caravan
(3) Merchant Quarter + 9 gildar