The weird thing is that each city level for every specialization adds research in large amounts. This needs to be cut to +1 research per city level. Getting +12 research from a level 5 city makes towns much better than conclaves as they can get there twice as fast. A towns only approach should not be the best tech strategy.
The only issue Conclaves sorta have is food but otherwise they're incredibly easy to grow thanks to Sovereign's Call and the starting spell (can't recall its exact name atm) which grants additional Grain per Essence. That +1 Essence building especially helps here (it's like a free Inn). If anything, I find the Growth buildings in Towns to be subpar by comparison.
And once you've got a late game Conclave the amount of research you can pull in is truly astounding.
As for the Town idea I am mostly in agreement. I'd rather the +HP per grain and other unit boosters being completely dropped from Towns though. In my mind I've got the following idea for how the settlement types should work:
Towns - Expand your empire (ZoC), provide food and growth bonuses to the rest of the empire, and serve as your commercial center. They already do much of this so I'm rather happy with them right now, although they could do with a few tweaks. As I mentioned, their own growth is somewhat slow (even if going for the high-cost festival), and I think doubling the well/inn growth bonuses would be a good move. It would also be neat if high-end towns could provide a faction-wide growth bonus to further enhance their usefulness as the primary support-class city type.
Conclaves - Provide magical benefits, serve as the research centers for the empire, and be the center for magically trained units. That last one currently isn't in the game at all, besides maybe the +25% XP bonus. I feel that while the Fortress could provide hard hitting heavily armored front line soldiers with its all around bonuses, the Conclave could be used to improve the mage-class units with better magical attacks, support abilities, cheaper crystal costs, etc. It also doesn't really boost magic directly as it stands outside of providing mana. I'll provide my own ideas for Conclave upgrade improvements later.
Fortresses - Military centers, heavily fortified, but also exert a larger Zone of Control and, more importantly, should provide field benefits to friendly armies while interfering with enemies. The military stuff is already adequately handled I think, but I also believe fortresses should be used as historical ones as a means to control the area. To do this, I think they should share the larger ZoCs of towns and have internal buildings which can accomplish many of the same features of Outposts (such as reducing enemy movement through them). This will help make Fortresses an incredibly potent tool for keeping a tight hold on your empire even if they aren't placed across the entirety of a chokepoint.
--------------------------------------------------------------------------------------
Conclaves
Currently I feel the purpose of the Conclave isn't fully realized. You've got some research perks and a better Essence count once you've taken the upgrade (which tbh feels essential currently, although that's already been pointed out), but we don't see much in the way of magical improvement outside of a mana generation bonus and a single upgrade choice for a single mana type. So I propose the following alteration in level-up upgrades to improve that.
Level 3 - Element Selection
The first possible upgrade list I believe should follow the same type: a bonus to spell power. There would be a total of 5 possible upgrades randomly determined (so you won't always get what you want), each coming with its own +1 [Insert Element Here] bonus. Kingdoms would get access to the Life booster, and Empires to Death, as per their usual restrictions. This upgrade choice will help solidify Conclaves as something greatly favored by magical types without being limited to only a few specializations (right now, fire).
Level 4 - Specialization
This upgrade level will help establish the Conclaves true focus. This can be either an idle Research Boost (but as suggested, much higher than +20%), the Oracle's +1 Essence, and something specialized for the magical warrior aspect. I'm thinking an upgrade that adds across the board to elemental damages with a percentile increase. I haven't used mage-soldiers much so I'm not sure what would be balanced, but it should be sizable enough to justify building the troops at the Conclave instead of a Fortress. In addition, this improvement would reduce Crystal costs by 25%.
Level 5 - Achievement Bonus
These should be truly impressive additions to the city as a reward for reaching Level 5, possibly globally oriented. The global +10% to research improvement is an obvious choice to cap off a primarily research oriented city. Something else that should be considered is moving the Alchemist Laboratory (the one that adds +1 Material per Essence) here instead as normally it has a massive production cost in a city-type that gets most of its bonuses by being idle. As an upgrade the city won't need to wait 30+ turns for construction on an improvement which only helps build more things, when it's usually amongst the last things you build. In addition, the lab could open some new potion options in the shop. Finally, there needs to be a magically oriented focus. Rather than boosting magic power directly, the final upgrade would be a massive golem able to cast any spell the sovereign knows with the same modifiers. The golem itself would grow in power based on shard counts (Earth adds Defense, Life/Death adds HP, etc.) and able to move around the map. If it is destroyed it must be retrained at a Conclave at a sizable production and crystal cost. The player can have as many of these golems as the number of improvements which grant it. Thus, a magical sovereign may be able to spread his or her magical might further than a single location or collect them together for some truly terrifying spell power on a battlefield. Even non-mage sovereigns can benefit from what is essentially a warmachine boosted by any shards they've acquired, although obviously this option is less appealing than if they were primarily casters.