Actually, in the middle ages you could have a prosperous province with big cities and a castle to protect them, the fields, a strategic pass or anything. So castles could co-exist with cities. I like the standard setup, but its not realistic. So maybe every settlement should be a city and you could have the option to further fortify the province by building a castle (ONE per province ONLY). Imagine the enemy taking the city and you still holding the castle.
That would complicate things a lot of course. Any other ideas?
Anyway, i dont know if thats possible to do on this game.
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