Your idea has merit, but it depends on the spellcasting design Stardock intends. Wizard towers of Age of Wonders Shadow Magic or increasing cost a la Master of Magic.

When I was writing the OP, I did not think too much about the lore side of it.  It is not necessary 'life magic', it is still the same life/death, earth, fire, water, air elements SD envisioned.   It is just that when there are more mandune Might (or cities) on the land, the harder it is for a Sovereign to understand the Magical aspect  of the land.   The only way to enjoy the full understanding of Magic is to live in the environment with natives, rathering than surrounding oneself with cold stone walls.

I am trying to influence how the Dev develop the spellcasting design.  & I do not understand what your 2nd sentence meant.

Have I mentioned good vs evil?  I afraid I have not.  You still can be a evil channeller.  The method mentioned in OP mainly says how (the % composition of cities vs native dwellings) you build your empire affect the how much magic you get.   I've not thought about anything related to good vs bad, but maybe you can elaborate?

Cerevox, the academy in the Might empire still allows spell research.  It is just that the rate of Spell research point generation is slower than the Magical empire.    You still be able to cast spells, it is just that usually the might empire cannot cast spells as high-end as magic empire that quickly.  And in the very late game, an might empire might even catch up on magic.

I had recommended specific academy (like life/death, earth, fire, water, air, summoning, illusion, direct damage, bluff/debluff) already in other thread, maybe certain academy like Morale Academy will provide a research bonus of Morale related spells when your Might Gauge is high?

Yes.  in this proposed system, there is 2 path, plus the in-between path.   But what about the traditional TBS?  There is only one path, a very generic path.   This generic path offers all the possabilities and end-up a very bland gameplay experience, because all of your games' goal is to get the most magic & might by expanding and expanding further.   This proposed system does not force you to expand (that much) if you want to be great in magic, due to the % based gauge.

Essentially, this proposed system force you to choose, force you to commit to one of the 3 ways; & the in-between path might work almost like the traditional TBS game which have might & magic developed in a balanced way.

I have no answer to that, but the traditional TBS way is always hurt the natives, so the player can hopefully be strong in magic & military.

My view is that in traditional TBS, although you seemingly has numerous path to follow, it is not.  The only path is to landgrab, so you has the maximum magic/might production possible.   The paths avaliable to player in traditional TBS is on how creatively you utilize these grabbed resources, in order to landgrab more.

In the proposed system, there is an option that you don't need landgrab that much to gain maximum spell research ability.  This can be a nice change for the genre.

As far as the context of this discussion & what we currently know about EWOM, both magic/mundane economy is connected, because their power is still proportional to how much land you control.

Essentially, I am proposing some sort of indicator that reflects on how your empire is being built (whether it is magical/mundane).  And this indicator affects the actual productivity of some crucial buildings.

In traditional TBS, there is no such indicator nor building productivity variation.   Player always need an extra barrack to produce extra units; an extra academy to research spell quicker, an extra mana node to get extra mana.  This leads to bigger is always better.

Will such indicator (& varying building productivity) provide a different & enjoyable gameplay for EWOM?