Well, you might be interested in prior discussion on this topic, such as can be found here and here, and perhaps in other places that I was unable to track down right off the bat.
I like your suggestions overall, but I would suggest it should not necessarily be a late-game feature; I would like it if the player had the choice to expand early, but have to balance this out somewhat so they don’t get spread too thin, as it were (most likely/easily due to having too few citizens early on for each of your cities/outposts). That would make more sense with the colony flag, as well, as that seems to be something that should be crafted by the weaver, when you think about it, and should be not much more difficult than the banners they can already craft.