Thanks for all of the discussion. After reading it all and pondering for a bit, I present...

Proposed New Settlement System

Settlements no longer have an influence radius, instead they are associated with regions. When founding a new settlement you place a central administrative structure. That structure represents the "claim" to the region. When placing the structure, the target region will be highlighted both on the local map, and on the minimap. You cannot claim a region that is already claimed by another settlement (yours or otherwise).

At certain population thresholds a settlement can construct an additional administrative structure in an adjacent region. In the future settlements may be restructured to contain districts (mini settlements within a settlement), when/if that happens it will be based on regions (each region becomes a district).

Structures may only be placed in a claimed region, but citizens will be able to harvest trees, gather pigs, and build roads in claimed regions, as well as regions adjacent to claimed regions.

Ownership Changes

If an administrative structure is destroyed, then that region becomes unowned, any citizens will evacuate, and any structures will become useless. If another group places an administrative structure in that region they gain control over the structures and any items they contain, effectively capturing the settlement. This could potentially mean the capture of Maskling settlements, or Masklings capturing your settlements. Note that this excludes the people, they'll just flee to the remaining parts of the settlement.

If a settlement loses all of its administrative structures, and ceases to control any regions, then that settlement ceases to exist, and the population converts to immigrants. This allows you to abandon settlements by deconstructing the administrative structures.

Administrative Structures

I'm not sure what to call it yet, but the administrative structure will be heavily upgradable. Higher levels of it will provide additional features, such as attacking invaders, boosting settlement happiness, providing a bonus to research, and diplomacy.

How Big a Region?

The world generator will aim to create regions about 90 tiles on a side, roughly filling a 1920x1080 monitor. Individual regions will vary, of course.

This is a very interesting issue, here is my take:

I've been thinking that you could tie influence to buildings, say give a small base settlement influence radius and then have claim territory within x tiles from it's structure. You could then modify x by other factors, say local settlement density, population, distance from the colonies gravitational center, etc... in order to discourage colonies from getting spread too thin. That said, distribution inefficiencies are their own elegant solution to shoddy city design. I don't like tying territory to biome types, I think most or all of my cities would fail that check.

I would also limit how closely settlements can build to each other, requiring them to merge administratively first.  With some level of separation enforced, I would then have the game automatically decide which settlement a building belongs to based on the owner of the ground it is placed on. Now you no longer select a city through the menu, you select simply by viewing it in the main game window. You're now either in creation mode or destruction mode. :D Defining territory more explicitly while managing it more abstractly could be useful later on with empires, where ownership can be multilayered and ambiguous.

Some buildings may ignore territorial ownership, instead allocating labor by raw proximity and availability. These would possibly include roads, mines, hunting/lumber camps, towers, etc. It might be useful to add a tower type distinct from the one for use with walls. This could be the same as the 2x2 planned for early game and could be useful for territorial control later. I typically have mines fairly distant from my settlements, so I'll place a tower next to them for monitoring and defense. A building that claims territory can only be placed on territory that is already owned, and a building that does not claim territory must be placed within a certain distance from owned territory.

I'm unsure of the best way to effectively limit settlement size. One could use public health factors, effective distribution limits, or food production in various ways to provide soft caps that might evolve with access to new resources and technology.

Mr. Coel has some pretty great ideas with masklings. Perhaps they could rarely take over cities or even empires, like the hyksos, the amorites, the hittites, the  kassites, etc. Having desert tribes or forest tribes is also pretty compelling, along with monsters roaming the land. I would also like to be able to turn away migrants, but have them potentially form/join other local maskling camps or villages instead. Many other rich possibilities with migrants in general, to be honest, but I've already gone on too long. :P Edit: I couldn't help myself. Imagine a drought in a neighboring region prompting a large influx of refugees into your own. Now you must balance integrating them into your empire (with all the logistical troubles that brings with it in terms of food, housing, public health, happiness, etc) against them just pushing you out and taking over.

I like the idea of restricting a settlement to a biome rather than a radius. However, as you said, it might cause some problems. A possible solution is to allow certain buildings (mines, roads, 2x2 towers eventually) and activities (gather pigs, cut trees...) to be built in adjacent biomes, letting citizens gather ressources from adjacent biomes, but not live there.

A more complicated idea would be to have a specific building (a town hall) that claims a biome. When a group of settlers is ordered to settle, they build such a building, claiming the biome. When a settlement reaches a certain population, it is allowed to build another such town hall, claiming a second biome. This could again tie into districts somehow. The masklings may also be drawn to the town hall, trying to destroy it to kick the settlers out. It would also be a prime target for all kinds of upgrades and various mechanics and interface (nobles, diplomacy, early religion...).

I also like the idea of  maskling tribes claiming biomes. It would make them seem more intelligent, more relatable, and it would open the possibility of peaceful interactions down the line. And/or conflict between masklings. Maybe they'll even expand under certain circumstances, one tribe gaining in power and asserving or wiping out tribes you were trading with would be a matter for concern or even war. Imagine, going out at war to save masklings!

The Maskling changes could be super fun, like having them guard the biomes with copper or limestone (or other rare resources), making it more difficult to get the higher resources. Makes having a military a requirement for the expansion of your empire.

These changes might also mean players will need to create new settlements and explore further then they might have before, and increase the importance of trading and your trade routes (protecting from masklings?).

Everything sounds great! Would you unlock adjacent regions through growth like population/wealth? Any plans for 1.5 to expand the number of current biomes?