[quote=DR_TRAPEZOID]
That all looks good to me.I'm assuming we can still throw in our own little baby villages, to give us some resources outside of taking the massive settlements?
[/quote]

Yes. That is what is meant by 
"With NPCs, feel free to control minor NPCs (eg. a village which you are raiding, random individuals, etc.). For larger NPCs (eg. a city, an entire army), you should probably consult us.
There are probably a lot of empty spaces in the description of the world. You are free to fill in those spaces (with-in reason, of course. Any major development, such as an entire hidden nation or artefact of great power, would need to run through us first)." (Ground Rules)
"There can be other lesser races inhabiting Cyrpus as well, in the corners of the land where the other races won't have wiped them out or assimilated them. However, they obviously wouldn't have the same level of influence as the aforementioned five." (NPCs)
and the one Gecko brought up.

Those little villages, at least those owned by the major races, will also be marked on the map. I shall look at real maps of small European countries to get a realistic spacing for the villages. It wouldn't do to have infinite villages within marching distance of your Dungeon.
EDIT: Oo, what a handy article. [url=http://www222.pair.com/sjohn/blueroom/demog.htm]
EDIT2: Oh, it turns out we've got thousands of little villages.
EDIT3: No, wait, got the area wrong. Maybe just a thousand, plus or minus. ('just a thousand', what am I saying?)