I like your plan! Some thoughts:
Split prestige from population growth and use prestige for something else.
How about instead off prestige determining growth, have population growth caused by births (I guess that is what you intended), and have prestige determine where those new people will live. If for example you have two cities with free living space, one with 9 prestige and one with 1 prestige, out of every 100 people born 90 would go live in the first city, and 10 in the second. This would represent people coming of age, and choosing where to live. This has the advantage that it isn't totally different from the original game, so it won't be a big adjustment for players.
Perhaps you could also add a mechanism that large populations cause negative prestige, thus slowing down the growth when a city starts to get overcrowded.
Alter many of the games tiles to reflect an even bigger world. Buildings will be scaled down on maps to give a sense of the size of the world and the populations
I am wondering how you are going to handle small villages and towns? These are going to be dwarfed in almost every way, maybe to the point of insignificance, by the larger cities. Some might argue they should be removed so you can focus on your cities. I hope you won't though, it would feel a bit to much like civ4. But you shouldn't have to put a lot of effort into managing them, considering the aims of this mod. I have an idea that might work, it needs some polish though.
How about removing all building options from the smaller settlements? So when you build a new outpost, it would just cover one tile, and that would be it. This tile would always produce 1 prestige, house a number of people, maybe produce some taxes, and that would be it. It would allow you to use one nearby resource, like a mine or farms. If you want to grow it into a village, you purchase a second tile. This two tile village would still not have any building options. It would produce maybe two prestige, house more people, and be able to use two resources. Same thing happens when you grow it into a three tile town, and a four tile large town/small city. You can only train some basic militia-type units at these towns, nothing fancy. Only when you start expanding it beyond that, it becomes a full fledged city with all the building and training options you would expect.
Only one real building option would be available to these small settlements, that would be adding a fort or castle. This would create security, maybe generate some prestige because of it, allow you to station lots of troops for a longer peroid, and allow the training of all troop types.
Like I said, it needs some polish, but I think it could be a good way of having smaller settlements without having to micromanage them a lot. What do you think?