I agree, I would like to see some individual personalities out of the sovereigns.  Perhaps have 2 or 3 personality types for each Sovereign so don't quite know which one you are going to get.

This might be getting to particular, but the AI should make some errors from time to time.  It does make it fun.  I have always felt the randomness is what makes strategy games fun.  Don't get me wrong, even on "normal" level the AI should make a mistake like that once every 50 turns.

All this sounds good, except the best equipment. Maybe, depending on city lvel, the units are different between peasant, then up to like honor guard and stuff.

Also, make walled cities unattackable. Walls could be an improvement from level 2 on, and the first city a nation has automatically has walls, or at least hedge walls.

Walls would be a "unit" by having hp. when that is destroyed, either by seige weapons or a new spell(s) of some kind, they disappear, both tactically and strategically mapwise.

In the expansion, maybe have archers behind walls be able to fire over them/stand on them, and units behind walls not able to be attack or to attack unless they go through a gate that can be closed.

Also, this (another quote): 

And armor would be localized... And area striked would depend in how desireable that location is... and how trained the unit is...

This would require a LOT, but if it was done right it would be absolutely fantastic. Maybe an expansion could include more of the RPG Element- allow us to duel another sovereign to the death!!

And this:

Please set Elemental apart from all other 4X games and do something unique. Give AI leaders some hidden stats such as:

• aggressiveness: How eagerly an opponent leader will engage in warfare, quest hunting, expansion, etc.
  
• recklessness: The size and frequency of an opponent leader taking risks such as committing entire armies to one task, or going to war with stronger opponents, etc.
  
• pride: How much the opponent leader is willing to forgive past conflicts with a nation. For example, an extremely proud leader may be stubborn and devote himself to taking revenge on a nation that has wronged him in the past.
  
• empathy: How likely the opponent leader is willing to embrace another peaceful nation and make diplomatic ties REGARDLESS of the strength of their armies. A highly empathetic leader may wish to form alliances with smaller, insignificant nations rather than go to war with them.
  

I love this idea, so I fleshed it out a little further:

I don't remember the group sizes past squad, so I'm assuming Sethai is correct (squad = 3, party = 9, company = 12).

Defenses added by city level:

lvl 1: 1 foot soldier, 
lvl 2: 1 foot soldier, 1 archer
lvl 3: 1 foot soldier squad, 2 archers
lvl 4: 2 foot soldier squads, 1 archer squad
lvl 5: 1 foot soldier party, 1 archer party

foot soldier: as you'd expect, a defender with armor and weapons consistent with melee combat

archer: ranged weapons specialists

I would love to add a support type at level 5 or with special buildings, but there is no provision for supporting roles in the current tactical combat given available equipment/abilities.

graceful degradation of missing technologies:

if squad not researched, replace w/ 2 individuals

if party not researched, replace w/ 2 squads

I'm not addressing company, since 12 is very oddly proportioned after 9

if archery is not researched, replace archers with foot soldiers 1-to-1

equipment: defenders are equipped based on settlement value, such that the cost of equipment = (calculated value of settlement * modifier)

restrictions: defenders cannot have metal equipment if no metal resources are activated in the empire; likewise for items that require crystal

implication: since the value of a settlement grows with settlement size, defenders should be better equiped for bigger and/or better settlements.

Palace:

Adds the Royal Guard to the defense, which is a single additional group of foot soldiers of size Math.min(citysize.defenderSizeRestriction, largest group size researched)

the Royal Guard should have 125% of the typical equipment value

Royal Guard group size restrictions for the Palace:

1,2 : individual (this might be N/A if lvl 3 city is required to build the palace)

3: squad (3)

4: party(9)

5: company(12)

While I was thinking about the combat text popping up (as mentioned earlier).. I was thinking how nice it would be to have a "bone crunching sound" for when a character scores a critical hit. It would add that extra oomph! to successful critical hits.

Hmmm where is that promised update? (And "Ai wars 3" for that matter?)