But it's the resources, trading potential, and defensible positions that really lead people to congregate in certain places.
If I were to design a system to allow dynamically changing cities, I'd start with the land. Give various swathes of land an "arability" value, from 0%-100%. Add some forests, which can be harvested for resources slowly, or clear-cut for farming. Put mineral resources in—both gold/gems (effectively identical from a gameplay perspective) and metal and stone.
Then start filtering population into the area with some basic intelligence. River deltas would be a first natural place to build cities. Farms would go up, and they'd need somewhere to sell their food. Mines would go up, and they'd need somewhere to buy food from. Trade routes would begin to establish themselves, and where multiple trade routes meet, other cities or towns would crop up.
So if you wanted to establish a new city, you'd need to provide a damn good reason for peasants to start congregating in a certain place.
Now, if you wanted to manually place strongholds, I'd be all for that, but you'd need to establish the population mostly by yourself—which is as it should be; a significant percentage of the population of a stronghold should be its garrison and their families. So you'd have to spend some time bringing in soldiers from other parts of the realm and setting them up as part of the garrison of the stronghold.
That is quite an interesting idea that could be discussed separately
