Again, note that this is not what I think or demand will be in Elemental, but just theoretical wishful thinking. That is all.

Depends on how youdefine Steampunk. Most fantasy games now have some steampunk elements in them, but the rest of the game is pure fantasy.
Steampunk.
Steampunk Fantasy isn't just magic + some technology.
World of Warcraft, for example, technically has both dwarven steam tanks and flintlock weaponry. But it's no in any way, shape or form remotely steampunk. So I still dare anyone to mention a steampunk game, which Nights Edge mentioned had been done so much.

Both, I like 'black box' style steam punk machines. Things that run on or fire or something, and its not really expained how else stuff works. It could be 100% clockwork, but nobody can tell, just see the results and moving parts outside of the main body.
Definately. Who cares how it works? It wouldn't be
proper steampunk unless the inventor uses at least three instances of the word
fluxcapacitator,
clockworkomajig or
teslapitor.
Or somesuch. My point is that Steampunk rarely makes sense. Especially not fantasy steampunk. Steam engine armors, steam-propelled jetpacks, enchanted revolvers, archimedes rifles - it's all on the same level of realistic as 'a wizard did it'. But with steam, gears, and propellers.
I think their problem was that they didn't know what to do with the steam. In any event, water power does seem like a good stopping place for machinery. Medicine, on the other hand..... as I said before, I don't want evolution or germ theory, but maybe hederity and selective breeding/seeding, and some basic herbalism. Or should that go on the magic tree?
Oh, yeah. Actual genetics is completely out of the question for me - mutations and such being left to magic, if anything. Medicine should be on the alchemy, herbalism and basic chemistry level, even at the very end of the game.
Eugenics have been around since the first civilized societies, so if that'd be in the game, it'd be great. I'm not sure how I could see that worked into the game, though.