In my mind, the set tile cities (like you are suggesting you might be headed to with beta 4) removes too much of the city construction (essentially taking it out completely), which is a shame. I happen to like the current city construction mechanic (playing with tiles and shaping cities) because I think it allows you to build forts and adapts to the openness of the game and making chokepoints. Having said that, I do think it could use a few changes to address the key issues:
1) To curb snaking/gameyness, add a small Gildar cost to constructing buildings as it gets further away from the hub, say 5 Gildar every tile after the first. Call it a cost to build roads/transport materials, or whatever. This will still allow the player to snake and game city construction if they want to, but at a cost. Which is to make the system fairer ... to the AIs who don't design their cities as well.
2 & 3 & 4) I don't particularly have a problem with "urban" cities, but the performance reduction is acknowledged (although I often play in cloth map, so it barely matters all that much). The way to address this in my mind would be to limit the tiles the city can spread to (say, 3-4 tiles away from the hub max), and put a focus on upgrading existing buildings over adding more and more of them to build. This would allow you to add more buildings/improvements, without having the world turn into one giant cityscape. In other words, you build your cities up instead of spreading it around. That way, a high level city can be seen at a glance just because of the bigger, more impressive upgraded buildings. Not to mention it adds a lot to the fantastical feel of the game while giving you the satisfaction of having grown that city yourself.
Should that be done, I think the current system is salvageable. You can still build and design your cities, although to a more limited degree, while still addressing the fundamental problems of the system. After that, if you want to make the system actually interesting, just add some flavor on where you put buildings:
1) Some buildings might only work in forests... say a Hunter's guild, that improves your archers and produces a set amount of food.
2) Some might only work on plains... a simple flower garden... that grows man eating plant units every couple of seasons (4 sounds right).
3) Some are awesome in deserts... a Fire Temple that generates a bit of fire magic, and can be upgraded as your city grows until it becomes that Elemental Temple of the Sun that is the envy of the world. Take that, silly Egyptians.
... etc. Just some random things off the top of my head. I'm sure you guys can make something out of it if you tried. Scrapping it all seems like so much wasted potential. Although, if you aren't going to use it, then I suppose it would seem like it's not a bonus. I'd really rather you didn't though. Because at least then, modders could still use it to make the really awesome stuff.