Well. Sandouras u're not that right ;)
The definition if there was built a Castle during the early and high (also late, but castles didn't play that a big role in this time) Middleages was limited by Law, Privileges, and Money of the Nobleman.
Every Nobleman that wanted to be Adressed as one, HAD to obtain a Castle- no matter how big it was. So u don#t need a wealthy Town or City ;)
Just a Noble Guy owning a small piece of Land. The wealth and size of a town granted it#s definition for fortification, which also had to be allowed by law. A privilege not every city got.
Additional u had different kind's of Nobleman. (feudal-system, Lords and Ministerials..)
This brings me to my idea of making more than just one Castle available per Province (as the province system is pretty wrong too ^^)
During the late Middleages just the highest Authorities, and some wealthy Nobles could manage to keep their Castles intact, reinforce them with new defences, and build Fortresses and Forts (the latter are in general fortifications for Troops, and not for Lords, so there is a big difference in naming than just the styl of it's walls!)
Most of the small Nobleman couldn't pay to stay up to date, as they primary lived from agricultural support (not money!)...i could quote loads of books now ;) but let#s keep it here. Just to show the feudal System and Development of Expenses

So my suggestion for Modding disneystyl MTW2 to Realism would be:
- deleting that disney like Worldmap model of Castles - replacing it by something more realistic

- i completely agree to that one City, and optional addable Castles ("Fort" option).
But i would make Castles damn expensive(even wooden ones), and would not just limit them to one per Province
==> this would make the player think a lot on where to place Castles (and later Fortresses) strategically!
As for the remainance of Castles - i would say they should tend to decay if there is no Nobleman in them. So you would be additionally restricted to just build Castles for your number of Nobleman.
And it would give bribing another Dimension! Imagin (like it was allday practice during those times) one of your Nobleman switches sides to your enemy, holding an important Castle in your territory!
This would resemble the actual situation in the Middleages pretty realistic - tho i donno to what degree it would be able to do?

- Try modding the walls! During the development of Cannons the Walls got more narrow and where widened to withstand the shots! ditches were widened too (sadly MTW2 is lacking ditches!)
Additionally Rotaries were developed and added to the Walls.
As this Game features the Basilisk Cannon (developed in the 15th century) it at least ends in that time! So the final development of Walls should ende here too!
(I'm not asking for making bastionary Fortresses later than 16th century - but at least those first defensive answers to the growing number of Cannons and Guns)

- The last Styl of Fortifications should be very expensive in comparison to the first medieval Castles; and there should be no earth/wood version of this late Defence (as this was Dutch development in the late 16th century)