I'm tired so I'm not going to completely correct you.

As has been posted in another thread, city size dictates what you can build inside the city.

The towns outside have 4 chains of buildings.
Schools (tech research)
Pleasure Houses etc (recruitment of Rakes)
Church Schools (priests/conversion)
Industry (Weavers guild, smithing guild etc)

When a town is founded, or the building is destroyed, you may choose between any of the four chains.

When a harbour village is upgraded, you can go merchant, ship building (shipyards etc) or fisheries.

Resource towns can not be changed from what they are. (Fur trappers, mines, timber yards etc) Yields are relevent to what area they are and seem to be influenced by growth in the region.