I've been following Stardock and loving their games ever since discovering vanilla GalCiv 2 (way before Dark Avatar came out) for years now, and I tend to lurk the forums and not really post, but, well, I suppose it's necessary to be heard sometimes! I do think, despite the issues it has (I've still had a blast since release with Elemental, mind you, but there's no getting around that it has so much more potential), that the reason people have such strong feelings over Elemental is largely the same reason, Frogboy, that you do--that they're in love with the idea, the concept of what the game itself represents--and that they want to see it to fruition. But being on the outside manifests it in a rather different manner, as the last few weeks have so very well put on display.
I do have a few suggestions and ideas regarding the changes you've proposed and your plans up to and including 1.10, if you'll hear me on them. I'm not big for sweeping changes, as the core bones of the game are very solid, and only what's been draped over that framework is really flawed in any respect. So, I shall endeavor to be reasonable and developmentally viable with my suggestions.
I'd suggest, beyond the stability concerns (I just recently started getting the out of memory errors post 1.07, though I don't know if it's coincedental), that simple interface and game polish is a big concern. While we've had posts, with fancy illustrations that go to great length to describe sweeping changes that should be made, simple things like text that overlaps on unit cards, that-irritating-elemental-creature-walking-animation-that's-too-slow-for-its-rate-of-travel, and the fact that the hero character sheets have issues with long bits of character biography text (specifically, the information that's supposed to display below it, things like the attributes, simply get cut off instead of carrying onto a new page) would go a long way toward alleviating those issues. The big sweeping changes certainly help, but little things like that help elevate a game above the pack.
On shared mana pools and the general spellcasting revamp: An excellent idea. But, will the regeneration scale in such a way that our casters can actually regularly fire off a spell, instead of having to sit back and pass turn eighty percent of the time? Failing that, some zero-cost spells, one for each element that's a simple, very modest damage, single-target spell might help out there. Saving up for a big boom is nice, but actively engaging the player should always be a prime concern. Each Element should perhaps, to differentiate them (this has been something many people have noted), have a special effect tied to each elemental type. A fire spell, for instance, could cause a bit of residual "burning" damage for consecutive turns that fades away after a few, and is more intense with each Shard you control. Lightning could "arc" to nearby units, doing a modest amount of bonus damage. Water could freeze or slow some units. Earth could, perhaps, produce temporary terrain obstructions that alter the geography of the battlefield, or something. Any kind of differentiation and "personality" to each element helps. The game is, after all, called "Elemental."
On moving spellbooks to Research. If this is done, I would suggest, in the spirit of allowing for more differentiation of characters, to add a larger number of "perks" and "flaws" as possible choices for character creation. Just using the basic game mechanics, and even gleaning some of the stranger abilities that heroes and bandits have in the wild provide a lot of options there. A nice assortment of cheaper and more expensive abilities would do a lot to "personalize" your Sovereign.
Scalability, as has been discussed, has been kind of an issue with Sovereigns and Heroes, as many have noted. Back pre-1.07, my Sovereign managed to smack a troll with a combat rating somewhere in the five-digit range using True Damage via demons, and it ended up leveling him from level 10 to level 26 or so. This gave me...a ridiculous amount of attribute points, and with it, an observation. He was useful again! While not particularly overpowered, he could once again get in the thick of things. I think what this might signify is that perhaps three "assignment" points per level could keep our Sovereigns and Heroes at pace with technological development, especially compared to the more advanced and powerful units. This doesn't merely help the mage-types; it would, as you could plunge a lot into attack power, defense, and health, allow for a more combat-oriented Sovereign too!
And speaking of taking Sovereigns into combat, I'd like to bring up the Dynasty/marriage and children system. Currently, if your sovereign dies, even if you have heirs in line, you lose the game. Likewise for the AI opponents. This actually shocked some of my friends when I mentioned this fact to them, as it just seems like carrying on the family line is a logical and natural thing to assume a game to do when the framework is in place. As the game already points out who's first in line, Sovereignty should pass to the first offspring in line to the throne, and so on; which makes marriage more than a simple way to pump out Hero-units. In fact, it's why many actual monarchs placed such emphasis on producing an heir: it secures the future of the kingdom.
With the Research trees as well, and idea I had was to expand on some basic concepts already present in the game, by making the Diplomacy and Adventure trees more relevant. Diplomacy should, in fact, result in a wide variety of the more fantastical available for recruitment, as it does now (Demons, Darklings, all sorts of other things), expanded in such a fashion, perhaps with a few in-city improvements for more basic units, that they could be a viable alternative to humanoid troops. A rule of thumb would perhaps to make them either weaker and with a special ability or rather more expensive in gold cost (sort of reflected now), than humanoid troops, which gives people who lack early access to metal something to build an army out of--an alternate path. Of course, winning a game diplomatically is always a challenge, as it was in GalCiv, so more diplomatic options couldn't ever hurt.
I've thought a lot on the Adventure tree, and I can't really wrap my head around how to improve it. I rather dislike the idea of ruins, caves, and huts suddenly popping up in the land upon researching something. If Warfare focuses on armies of troops and Diplomacy/Cooperation focuses on making pacts with fantastical creatures, perhaps it could focus on benefits surrounding parties. That is, groups of Heroes and such; benefits for them, and such, in addition to being part of the mechanism that directly ups your "quest level". Add a lot of really fantastic, interesting, and potentially game-changing items that become more likely to find, the deeper you delve into the tree. Making it the "Role-Playing Game" tech tree could have some interesting implications. I'm just throwing ideas around here. In addition, having all the various ruins and huts pre-existing on the map adds to the sense of geography on each map. It gives a sense of place.
And finally, to cap off an extremely long-winded post from someone who's traditionally a lurker, there's been a lot of talk about adding special abilities to units. Now, we've got a Settler backpack that adds the Create Settlement ability to units. Why not have the other backpacks give abilities instead of esoteric jewelry-esque stat boosts? Each one, when researched, could provide a specific ability (The healing one, for instance, could allow that unit to heal other units) that specializes your more "mundane" armies into more specific roles. It seems an organic way to add in this kind of thing without drastically redoing entire portions of unit design.
In any case, this game really has the potential, in time, to become a classic. I think with some polishing, tweaking, balancing, and general revamping on what's already one of the most solid gameplay structures in years (It absolutely nails the "one more turn" thing, much to the detriment of my sleep schedule) would set itself up very well for a potential rerelease (as you mentioned in the past) with an updated master copy and perhaps the first expansion to retail units as a re-reviewable copy of sorts. A "second launch", as it were. Until then, I'll continue enjoying the trip!