So, I think it's reasonable that towns for minor powers are limited to size one WHEN THEY BELONG TO THAT MINOR SOV.
But once you capture one, that restriction should be lifted, because now the city belongs to a real empire and restricting it to size one at that point is flat out stupid.
What you're basically saying is, raze every minor and rebuild it with a pioneer. The pioneer tax for conquering minors!
The minors don't build squat so razing them is no biggie.
The only point in keeping the city is it saves a pioneer - but only if you can actually grow the city like any other city.
When I first started seriously playing, I had no idea wtf was going on. All I knew was that I conquered some crap looking city the dumb AI never grew, and then I couldn't grow it either. I was like WTF...this city is BORKED. Later I learned they were minors, and unlike in GC2 where minors have better planets than majors (WTF) in Elemental minors are like uber pitiful placeholders that seem to have no point to them. Or worse, they're a trap to get you to conquer them and get stuck with some lvl 1 piece of crap town that never grows and just wastes space.