First, regarding the concept of campaign continuity in general, I think it's a very good idea. I also think, given that Elemental appears to be based on the idea that you, the player, represent a single, persistent character in the world, that it will be absolutely essential never to take away learned spells or technology between missions. How can I, as a single ruler/character, suddenly forget what I just spent weeks learning? I know people who gave up on the GalCiv campaigns for exactly this reason and I think the problem would be even worse in the more personal setting of Elemental.
I'd point out that it wouldn't take much narrative sleight of hand to talk yourself into a more flexible position in terms of taking away units or structures, though: a cutscene showing your previous opponent's attempt at dying revenge by summoning a magic meteor to obliterate half your town or some mission-intro text explaining that some of your troops were lost fighting off a dragon raid between missions would let you ensure that players never begin a mission with too much power.
5. restrict technology development to a limited set for each mission, removing restrictions with each mission
- alternate: base restriction on total tech "points" to allow player some tradeoff choices on what they research
I, like Ron, like this approach, especially the alternate version. Depending on other game mechanics, it might also be a natural approach to preventing unit hoarding between missions: an omnipresent unit upkeep mechanic (either in terms of food or money) would work to prevent the accumulation of unnecessarily massive armies not only between but also during missions. Of course, that would have rather profound effects on much of the gameplay, so it might be a cure that is worse than the diseas.