Okay, I get the thing about cities that never get out of WIP status (Even though they should never be completed anyhow, seeing as there is always a great hall/pool/library/centralized farm etc. you can add) and just end up being giant reserved flat plains, those can really ruin the vista.
But that thing about cities having a purpose?
The purpose of cities in SMP (if it was working as intended and not a buggy thing) would be in my opinion:
1. Safety and shelter from creeps and random chest looters/pvp killers by providing city walls and laws as well as guarded storage/housing:
Since Neither creeps nor pvp work as intended right now and zones regularly get crummy and let people loot (not to mention the chest protect), I can really not see how that would be an issue atm. You can't get killed unless you jump off a cliff or go diving in lava/water without taking a breath now and then, chests are always safe and the global chat makes reporting a player for killing you on purpose a joke. So, not viable right now.
2. Central place for player shops:
Since we have a global shop to buy things from, as well as teleport and runes to get around to people without ever needing to know where to find them, not to mention /item and the magic stick, that is not viable right now, either. You don't even need to hand people cash, since it is completely virtual.
3. Place to find payed labour to take back to your project/earn money for something you desire:
See 2. You don't need to look for work in a town, and you don't need to find workers in a town, both can be gotten via /tp, /warp or runes.
4. Safe locations to stop by at nights while travelling large distances on the map:
2. again, I fear.
5. Place for authority/lawmakers and enforcers to conduct their business:
Teleport yet again. *sigh*
6. Distribution of labour so people can get more stuff done in less time:
Right now there is nothing you can do that you cannot do on your own, since tools can be renewed and except for obsidian there is no material that is really time consuming to mine.
7. Meetingplace where you can talk with people about your projects, or anything, really:
We have a global chat for that.
So, right now, cities serve no practical purpose except for giving people something to build while they wait for notch to actually make SMP SURVIVAL viable. Until that happens, I am all in favour of people building whatever they want.
I'd really LOVE to have a real roleplaying factor in this game, because, frankly, the possibilities are astounding. But there would be a lot of things that could use change or erasing in order to make it fun for me.
1. Make posts on global chat have a hefty cooldown and penalize using it for anything but emergency calls (I'm closed off in a cave with no more torches, and I can hear skeletons outside, halp, I'm lost and cant find my way to anything I recognise, I swam out into the ocean and cant find a landmass, etc).
This would force the players to actually get into close proximity to communicate, making roads, minecarts and tunnels a requirement, as well as making cities a cool spot to gather and just chat about the stuff you built, searching for workers to help excavate a giant underground dome, enquire about a job as railroad worker connecting this city with the next, etc.
2. No more teleport, and make /home have a cooldown. Also, regulate runes so that you cant just connect everything to everything. Same reason as before, actually forces players to work together to build easily traversable safe roads/minetracks with shelters every few minutes for nightfalls, makes people have to actually go to the city to trade because you can't teleport to everyone (giving shops a purpose).
3. Make mining take more time unless you specialise in it, so that becoming a fulltime miner is something feasible. As long as you only need 2 seconds to farm a block of cobble, nobody in his right mind will travel 8 minutes of creepinfested land to the next city to buy it. And as long as trees, wheat and papyrus grow with such rapid speed, nobody will travel to a city to buy those either if it takes less time to just plant 40 saplings and let them grow while you dig for some iron, build a small pond, or whatever.
4. Fixed duping and no more /item or /stick or /tnt for anything but administrative purposes (and trustees, because, face it, those guys help keep the server running), so that once the diamond under a town is mined, its GONE, and if you want that diamond pickaxe, you'd better be prepared to pay a hefty price or venture farther and farther out to spend a good chunk of time mining for the diamond you need. That would actually make traders something besides a prestige thing, and would give players a reason to spend the day mining.
5. Fix item renewal on throwing them out, so that iron/diamond become vastly more expensive. Yes, there is much iron, but everytime you get hit by a spider you lose durability on your iron armor, and everything you mine decays your pickaxe. And there is no limit to creeps and a VAST limit of stuff you can mine, but only a finite amount iron to build tracks, tool or weapons with.
6. Make money only earnable from the city, or make it so that you actually have to physically collect your daily cash from a constabulary/treasury/bank branch building in a town. That ensures that you have to actually visit the city or certain players to receive your cash. And while you are in town, why not take those 4 stacks of treetrunks you harvested and turn the profit from selling them into enough diamonds for your next pickaxe?
7. Fix hp and mobs+pvp, obviously. Right now there is NO danger at all outside, but if it was actually really dangerous to go out by night, or even at days when certain players are on, the added safety of sturdy citywalls, a sheriff/guards and a jail/law would make a city appealing as a location for your shop/storage.
Draw up laws that prohibit PVP/murder inside of city borders, making it basically a safe haven in a very dangerous world. It would also make buying stuff more appealing, as you have to decide between risking your life and time to collect some stacks of cobble or spending money to avoid the risk and time loss of mining it.
8. Remove chest protection from anywhere but inside of citywalls. Yes, I know, WHAT?! Getting your stuff stolen sucks hardcore, especially if the stuff inside your chests was actually rare or hard to obtain (like a stack of obsidian, iron blocks, or diamonds), but I still remember how cities had a big drawing point when I started out here: Build there, get your place zoned, and nobody would ever steal your things when you were gone. It was the one thing I remember being constantly talked about. Enlarging the city storage, drawing up lists of who owned what, and buying plots to stuff chests on so they were protected by zoning. Simply because that way they were SAFE. It also makes visiting the city necessary because you have to stash your really valuable stuff there, or retrieve it from there to use it.
9. Think about making cash something you physically carry with you. That would make a whole new branch of gameplay available: Not only banks to stuff your cash in, vaults to be broken into by creative thieves and taxes to be physically drawn by the treasury, but bandits, holding your life hostage against a hefty fee, and tolls to be paid before someone lets you traverse the completely safe elaborate royal highway. Imagine sounding people out in the pub where they gathered to gossip/brag about their projects, trying to find out who sold a lot of materials today, who is going to venture out soon with a lot of valuable materials, and then setting yourself the task of ambushing them!
While annoying for the one ambushed, creative bandits that build elaborate landmines or sandtraps outside of the city to catch Mr. I-Just-Sold-A-Stack-Of-Obby and relieve him of his bulging purse would enhance the game, for me. It would also possibly make rogue citystates that provide safe havens for murderers and bandits a possibility. xD
All of this would of course need many more players on at once to be really fun, but if Notchs Portal-to-other-servers idea works, I could really imagine SpAradise being a giant buzzing trade hub for 5-6 other servers. There could also be raids from one server to another... (Take what you can, and give nothing back! Arrr)
All of this is of course just my silly imagination, but I would pay 3 times as much as I already have if minecraft was like that.