I feel this is an important thing to the game. Usually in 4X games you just spam cities where-ever you can fit them and reap the benefits. Now, Civ4 and Galciv2 both had some mechanics that tried to hamper this, but they were still a bit insufficient and wouldn't work well in Elemental(or at least my picture of the game).
Think about any fantasy setting. Now, in how many of them do cities spring up all the time? In very few. Usually the cities are unique(having some aspects that give a feeling of personality to the city) and at specific places, with the surrounding area filled with towns and villages. I would like this to happen in Elemental too. Usually in games the cities are very bland and differ very little from each other. This is mainly because you can always build everything in any given city. An interesting concept would be that you can/must specialize a city toward a single line, which would affect what units and buildings the city can produce. Let's say you tune the city to be a religious one. You could build the Cathedral(highest level of religious building) but you can't build an Academy(highest military building). This in turn would affect the troops you can build there and gives a small semblance of uniqueness. The idea as it is now isn't very interesting, however. Perhaps it could be spiced up with the following:
Like in Civ4(and to a lesser extent in Galciv2), you would have special resources all over the terrain that give special bonuses to the city that was built nearby, however, these resources should be even more varied and significant, giving unique and interesting benefits to the city near it's radius. Let's say there's an old ruined temple near the city. Now, this temple would still have a semblance of it's ancient power and thus the city(and only that city) would gain a special benefit of having a protective magical field around it, having a chance of cancelling all spells directed at it. Or perhaps a magical river flows through the city, giving strength and health to all living there, not only increasing the production of the city, but also the power of the soldiers produced there.
To an extent, part of the problem is caused with the assumption that you can and should build every building available in every city. Perhaps this should be impossible, due to long construction times or such, making the idea of specializing a city more pleasing. If you build both a wizard tower and a cathedral to the city, you really wouldn't have time to produce any units because of the long build times, so you should only build one, and at that you should only build it at perhaps one or two of your cities that build mage-like-units, because you'll need the lesser mages in addition to high mages.
So, all in all, less cities, but ones that are more unique, and a countryside that matters but not too much.
Also, an idea springs to my mind, one of specific troops. Now, as far as I know the game won't really have too much "in-house-content"(especially concerning the empires in the game) but rather but is rather leaning toward the modding of the game, so perhaps this idea won't work too well.
Anyway, the idea is that even such things as races of fantasy creatures are represented by resources. You can see in the map that there is a tribe of orcs or elves or whathaveyou near the river. Should you build a city there, that city(and only that city) can build units that come from the ranks of this race. In addition to normal swordsmen, you could build orcish swordsmen that have different(not necessarily better) stats, or perhaps you would like elven mages instead of your human mages. This most certainly would bring a sense of uniqueness to the city in question.