This has always bothered me as well.  Picture this: I have 2 cities.  One is a thriving metropolis, possibly full of martial academies and top-tier soldiery, while the other is a podunk backwater with 5 guys living in mud huts.  And you know what?  That podunk backwater can produce an army both exactly as quickly and with every bit as much quality as the thriving metropolis.  Now I'm all for unrealistic game mechanics if they make a game more fun, but I feel that this particular overly level playing field takes away from both how special the metropolis is, and from how unspecial the backwater is.

So, while it's Waaaay outside of the scope of anything that will ever get into the game, my ideal city troop training progression would be something like:

1. lvl 1-2, queue allows 1 military unit, raw recruits only, no mounts

2. lvl 3: allows 2 units to be trained simultaneously, can have 1 lvl of training, cavalry can be trained (requires cavalry training ground)

3. lvl 4: allows 3 units simultaneously, can have 2 levels of training

4. lvl 5: allows 5 units simultaneously, can have 3 levels of training

All training levels and extra capabilities must have been unlocked in-game already (research, top level hero or unit reaches a certain level, hero or unit of a certain level in the city training, whatever).

You could possibly have additional capability limitations; for example, need a blacksmith for each unit being trained with metal equipment, etc.  Could learn special weapon moves starting at lvl 4 city (if you use the weapon but don't know the move, go to a lvl 4 city for additional training).

Thus, focusing on that big city becomes more and more rewarding...  and cool.

Other ideas:

Building units in higher level cities is cheaper in terms of materials used (more efficiency)  If you need that knight in the border hovel, you can get it, but it will be more expensive to get the stuff there.  Experience levels could be capped by buildings that require city levels such as training grounds.

Another idea, higher level cities get more value out of the resources in their domain.  Shards produce more mana,lost libraries more research,  gold more gold, metal more metal, etc.

I think the solution is to make the population of the single city to count when it comes to making new buildings. Not the pop. of the whole empire. Then small cities can't build an archery range or buildings improving recruitment time. I they still use the population for those things, the city will be highly specialized for unit training, but not much else. I think that is a good balance, and it's not laying limits on how huge a city can be, with good planning. I'd like this much more then bringing back those limitations on how many buildings a city can have. That should be limited by the population you manage to grow in that city and upkeep costs.