Alright, this idea might appear strange at first, but bear with me.
In Master of Magic, you had two planes, both of which were more of less the same as far as physical properties are concerned. I propose that Elemental have two planes as well: the physical plane and the astal plane. Both planes overlap, and there is a corresponding site in the astral plane for every site in the physical plane (there is a toggle button to switch to the astral plane, which shares the features of the physical plane, but are blurred or distorted.
The physical plane is basically what we see in the game already. It's a place where you gather physical resources, build your cities, etc. The astral plane, on the other hand, is a second plane that overlaps the first but has drammatically different properties: it is the source of all magic. The astral plane, in fact, is where you channeler would actually "channel" magic from. Your channeler may even be a native being from the astral plane that has infused itself into a mortal, thus being a middle ground between both planes. None of your citizens or soldiers can enter the astral plane... except your channeler. Likewise, there are other creatures endemic to the astral plane that you can muster to your cause, recruit or fight against, but they cannot enter the physical plane. The only place that both planes meet are at shards, and at these locations the beings of both worlds can encounter one another and fight.
The astral plane is where you build most of your magical infrastructure, acquire most of your mana, and make many of your spell discoveries. In other words, magical dominance comes from dominance of the astral plane. When your channeler enters the astral plane, he leaves his body in his tower. So essentially your channeler would have two parts of his character progression as a astral walker and a material plane resident. A "material progression" would help primarily with his strength in the material plane, and an astral character progression primarily with his strength in the astral plane. So, want an empire of men with vast cities and armies with a sovereign with great martial prowess? Leave your sovereign in the material plane. Want an empire with magical mastery and a sovereign with vast magical power? Commit your sovereign to the astral plane most of the time. Most players would choose an inbetween route.
So by this method, you could have empires that are very small on the material plane, but have vast magical strength because of their exploitation of the astral plane. Your spells could even be heightened at specific locations on the physical plane if you dominate and develop it corresponding point on the astral plane. In other words, casting a deadly spell like meteor swarm may not simply be a function of "ready, aim, fire." One of the pre-requisited might be holding great power at the proper site in the astral plane, building a channel spire there, etc. When you cast on a location in the physical plane that you have dominated in the astral plane, you spells could gain massive mana discounts, empowerment, etc. So, if you can't defeat the worldly "Empire of Saradok'Nor" you could subdue the astral plane "beneath" the empire and run amok with spells.
Empires in the physical plane could still gain magical power without even entering the astral plane. They can build libraries for research or capture shards (which gives you a straight and steady influx of mana.) But without gaining an actual foothold in the astral plane, it would be difficult for even the largest of empires to keep magical pace with a sovereign that is prevalent in the astral plane but has a trivial presence in the material. In the material plane, you gain mostly gold and physical resources while you adventure. In the astral plane, adventuring and questing give you resources of a magical nature. So in stead of entering that goody hut and getting "gold" you would enter the goody hut and get "research points" or "mana."
This wall of text is thick enough, so I'll let everyone comment now 
