1.09v AI can Found new cities INSIDE player influence
No clue if this is bug or intentional so here ya go.
Save game to show you.. its like 1 or 2 turns before on the northern edge of my Capital Gildar will place a town inside my influence.
http://dl.dropbox.com/u/16692168/Influence%20issue.EleSav
Also note none of my children are magic users.