RE: Occupation armies. It's not just CivIII. It's also Age of Wonders, every Total War game, and about every game in which a single hero unit can slaughter the garizon, but can't handle police/fireman duties. The micro-management bothers me a lot less than rolling AIs does.
RE: Better AI fixing everything. It would make the game more fun. But it would still feel wrong to be able to flip cities with as little trouble as now. Speaking for myself, wrong -> not fun.
RE: Bigger army stacks. It would be great, but I do not think that a full 9x9 elite troop stack will be able to scratch a soloing hero, no matter how good the AI, not even with flanking bonuses and overwhelm penalties. Not without making heroes artificially constrained and not fun to play with at low levels.
I mean, even in .913 (low experience) on Ridiculous, before turn 100, my tankS get to the point where they can take on anything below a wilderness boss, as long as the mana reserves are topped. In .914 I beat the game without building any units, without building in any but one city, without declaring war even once, and without any experience abuse - just by doing everything with my sovereign. My hero "The Hero" was level 38 when he finished the Master Quest, and I had a blast (By the way, the Kingdoms wiped the floor with the Empires)
Without severely reducing heroes' power to the 'meh' levels, you will always have the "single unit takes city" situation. Hero in AoW, Horse archer in TotalWar, what have you... This mechanic is fine, if on the next month, the single guy gets mobbed by the angry citizens and tossed out the gates. It is not fine if on the next day he walks out the gates, and the city is a firm supporter on the new order, EXCEPT, if as sinγ suggested, the conquering side has done some serious work to look like the Savior.
And yes, Gilden often floats to the top. I have no idea why, as in Ridiculous AI everyone keep 100000+ coins at any time, so it's not their money making skills. End games are usually Gilden vs Yithril when I leave AI be.