I've never had any problems having text files instead of string.bin files.

I said that a village converts to a wooden castle because this is how it is described in the buildings_enums file (I'm assuming you mean data\export_descr_buildings_enums.txt), though in the game a Village does become a Motte and Bailey castle. Here are the entries associated with converting a building from the the buildings_enums file (which building they relate to is in brackets).

village_to_wooden_castle (village to motte and bailey)
small_town_to_stone_keep (town to wooden castle)
large_town_to_castle (large town to castle)

wooden_castle_to_village (motte and bailey to village)
stone_keep_to_small_town (wooden castle to town)
castle_to_large_town (castle to large town)
large_castle_to_city (fortress to city)
fortress_to_city (citadel to city)

I have already added my culture's name to all of these (I'm making a new culture). I have not in any other way altered the city to castle conversion entries (except by adding my new culture to them).