No not really groundbreaking at all.

AFAIK the better militia units will be the better units in general. Castles will produce the best units in low tech situations while cities will produce the best units when reaching full tech level.

CA said already on numerous occasions that a conversion from castle to city will be possible but costly. This will force us to plan ahead in order to keep up or stay ahead in the arms race. I like that part as it isn't 'mindless' upgrading anymore but rather assessing a situation so you can decide in which settlements you want to develope in a certain form. I hope this will be of some strategic importance, e.g. if castles are harder to siege successfully than cities. Otherwise it's only a question of dividing your settlements in the two forms.