Because by capturing, you are still gaining more cities. The whole idea is the more cities you have the harder it is to research the next new city tech. This not only limits city spam, but late game 'mop up' snore fests.

That is what the great Heroes are for.

Haven't you seen the movies?  The hero always gets there first, warns the people of impending disaster and then inspires them with charismatic speeches, takes the reigns of leadership to work with whatever is at hand and gives training to fight off the evils horde or die trying.  There is a big difference between a unit than can provide a few combat bonuses and a unit that can get a passive civilian population to fight even remotely effectively.

Yay for hordes of 1 HP civilians equipped with 2 attack and 2 defense!!! Inspired by a Hero.

Really this is a re-visitation of the Dynamic Population-City defense mechanism. Such inspired citizens would be as effective as the utility of average equipment.

Say there is 60 units of leather available per turn, and 30 units available for steel. Either all citizens have leather, or 60% have leather. OR average the numbers, say hardened leather is 2 and 2, while basic steel is 5 and 5, then the citizens would all be 3 and 3. Either way, all citizens would have 1 HP with the occasional 2 HP person.

I would still bet on a force of well armed vets with a hero agasint a bunch of peasents with a hero. Unless your saying the vets don't get a hero? In any case, you gotta assume the other side has a unit just as powerful as your side, otherwise its just wishful thinking.

It's a matter of different specialties and choices.  Under the right circumstances, one hero might be able to raise an effective army of peasants cheaply and quickly.  But on the other hand, with a long lead time and a big city and plenty of money and resources, presumably any sovereign will have options for raising a dangerous army like those hypothetical veterans.  Sure, if you can have your cake and eat it too, with a hero AND a high-quality army, that's better -- but it's not as easy.  You spent money and resources on the Circlet of Inspiration, or on armored levies.  You had a limited amount of money and resources.  The guy who gets both is winning economically -- more productive cities, expenses under control, whatever -- and it makes sense that he could produce a superior force.  It no more demonstrates that heroes leading peasants are worthless every time than the hero and his peasants being beaten by a much larger hero/peasant army would.  Two dragons might easily kill five archers, but that doesn't mean five archers aren't a useful early garrison, or that you shouldn't bother getting five archers because your opponent will just respond with two dragons.

Variable ease of acquisition, variable utility.

Actually, now that i think about it, if your cities are being attacked by veteran troops, and all you have to defend yourself with is a hero, you are probably screwed anyway.

Now that I think about it, if your able to raise a peasant army, with good terrain tactics/ect, you might have a chance to at least give the Invaders more losses than they would otherwise recieve.

Still, no matter what you are being invaded with, having a peasant army hastily recruited would be better than no army at all.

Consider this. Lets assume that all the Weapons you make are 7 attack, and all Armors you make are 10 defense. So you have limited troops because it takes a long time to train for those weapons, or something, or your focused on CHampions and Quests. Or magic. Lets assume you are focused on Champions/Quests. Your city might have 3 Uber-CHampions. THen lets say your Military Heavy opponent invades with an army of 2,000 troops of 10 HP, 5 attack, and 5 defense.

You then have about 10,000 peasants you can equip with 1 HP, 7 Attack, and 10 Defense. (out of an 80,000 pop city)

On pure numbers, its 20,000 HP, 5 attack, 5 defense, vs 10,000 HP, 7 attack, 10 defense. Who will win? Using Pure numbers, the veteran army will obviously win, but using those 3 Uber CHampions, plus Terrain Tactics, City Defense tactics, as well as other useful abilities on the tactical map, you *might* be able to pull a Win or a Draw.

Don't Underestimate Peasant armies just because of their 1 HP. Of course ... that raises the question of how they got so many weapons in the first place ... but this is all hypothetical. (the *reason* for excess weapons was that the Nation's Training times seemed VERY expensive compared to equipment costs ... meaning their Armory Industry was probably rather high)