They don't have to wait 5 turns - they can raze as soon as they capture. Either allow us to raze whenever we want, or make them wait 5 turns. Probably the latter is better. 
(Note it makes sense that Monsters/Denizens can raze immediately, but not AI players. Although it even then it is a bit harsh.)
Here is the latest save of my game, and the autosaves, which show the city that was previously there has now gone in the latest save, razed by Resoln.
https://dl.dropbox.com/u/8710134/1-29%20Five-f11.7z
