I think the biggest challenge of this game is going to be balancing having a "fairness" to it, so you don't lose your entire city in the first few fragile months, or after years of hard work.
We don't want it to be carebear either though.. the current system seems alright, from what I've read... however most RTS's you want a feeling of REALLY fighting for every inch of your kingdom, otherwise it doesn't seem as rewarding.
If there was some sort of consoliadation system, where as- you have a set area that you are safe in and the enemy can only cause minimal damage, your "homeland" so to speak, after you expand beyond this point (Hey, who doesn't want a massive empire), that territory is fair game. It will keep the game fresh seeing utterly destroyed cities, and massive warfronts, rather than just "Oh, I steal two of your apples." Put more of a tactical element.
Balance it so all players can have an effective fighting kingdom, but the opportunity to become massive, with the risk of losing it.
Either way, yes.. they are headed in the right direction