It's too perfect. I'm not sure why I didn't think of this before (probably someone else did but I missed it), but a cool option would be to have a buffed up sovereign, but if they fall in battle, the faction is defeated (AI or player controlled). The sovereigns should probably have extra health and maybe start with a few extra-levels. This would give you the incentive of bringing them out to fight from time-to-time (throw in faster leveling?), creating an interesting risk/reward dynamic.
If an AI faction is defeated, I guess either their cities could go away (I think they do this already if an AI player surrenders unconditionally) OR the cities could become neutral cities ripe for the taking.