That is really how EB works, ALXEB Team did not add anything in the EBBS script (aside the money balance)..

And yes, the population is always the problem.. when you play some barb factions - you can see that they have even more population problems than hellenic ones for example

And if you exterminate a settlement you are acctually killing the population - what you should do is to ''enslave'' them

I wont even say what were my extreme solutions when I lack the population - man, I even recruited units in one city so I could disband them in the other one where my army center is