I have an idea for the kingdoms war. All the kingdoms fight each other, except if they're allies. When the King/Emperor is killed, which ever kingdom killed him, takes over the castle, it says in the castle who has the castle right now, that would work with towns 2
Better idea: Move the castles to a sub-world of Graal2001. They could put them on a big island and set it up so it is nice for wars and stuff. It just doesn't fit in the landscape of Graal2001.