Choose to upgrade some cities to Fortresses when you get the option to choose city types. Then at city levels 4 and 5 choose the Prison and Onyx Throne improvements, as these globally reduce unrest by 10 and 30 points. Since each city increases the empire size unrest penalty by 3, if I recall correctly, 1 Onyx Throne negates the unrest penalty for having 10 cities, while 1 Prison negates the unrest penalty for 3 and a third cities. The unrest reductions stack, so if you build enough fortresses with these improvements you can have an empire with an arbitrary number of cities without suffering from the empire size penalty.

Conclaves can be given the Tenfell University at level 4 that can remove the unrest penalty to research in any conclave that has that improvement. Towns can be given Embassies at level 4 to negate the empire size unrest penalty in the city that has the embassy. Fortresses can be given Gallows at level 4 to negate the unrest penalty to production in the city with the gallows.

You can if you want. However, cities are generally more useful than outposts.

Thanks. This is quite helpful. Lets me fulfill my ambitions of a grand empire.......

To add to what Joeball said, when you are building for cities, make sure to site a couple fortresses on tiles with large grain yields. 

I typically have a main production fortress in the forest (for the lumber mill improvements that boost production) that has 4/3/2 or 3/4/2 and is near a clay pit or a orchard/farm so I can bring that up to 4/4/2 for my main fort to build my troops.  Such a fortress will grow reasonably fast and have enough production to crank out troops and I will put my tower of dominion here to handle unrest issues while building my empire.  This gives me a place to train troops whenever I need them.  I want a couple essences to speed growth in the beginning but later on I use them to buff troops trained there.

I will look for some high grain yield tiles to site a couple other fortresses that can grow fast so I can get the prisons/onyx thrones there.  For these fortresses, having the production tiles is not important, so, I just look for the highest grain number I can find, preferrably with one or two essences (for sovereigns call/natures bounty/gentle rain) to boost growth even more (if you are playing a kingdom that starts out with life magic, having an essence is invaluable since you can cast sovereign's call to boost growth by two points).  I won't worry to about the production ntile yields for these forts since I will be mostly building only gardens and other improvements that will boost growth (and maybe a couple defensive improvements like hedge wall/fort or gaurdion idol if it has an essence), rather than planning to crank out troops there.  These fortresses are just to control my own population through the unrest reduction you can get with high level fortresses. 

With a bit of planning you can get a couple fortresses to grow pretty quickly, and two fortresses at level 5 will yield a global unrest reduction of 80%.  Then you can take the level 5 improvement on your main fort that boosts attack and troop health if you want.

Sometimes though, I do a playthrough with a small empire.  You only need a few good cities to dominate the game, and if you raze enemy cities, it won't affect your unrest when you conquor new territory.  You can also use outposts to control territory if you want.  My last game I had a conquest victory with only five cities (three conclaves, a fort and a town) using a custom mage faction on a large map at expert/expert difficulty.  I was using paradin, so it was easy to slam down arcane monoliths to control territory.  You really do not need many cities to be successful, but sometimes it is fun to build vast empires.  Now I am playing Gilden with almost no magic and amassing a huge empire.  That's what I like so much about this game. There are so many different ways to approach it, each with their own set of challenges.