The army and caravan arcs, in their current incarnation, have brought us a new element: sprawl.
Most sprawl was created as people reached for nearby resources for a central city normally. Hence cities would create farming villages, or mining villages, or such to get resources that were somewhat far-away but not enought to create a new city. Implementing this in world-gen shouldn't be hard (if a city can't sustain itself in any resource with local economy, it first searches if it could create a nearby new settlement). I, instead, want to talk about players being able to do this in Fortress Mode.
The concept is pretty simple. Through the Liason noble you can have an expedition made by apointing an individual dwarf with the leadership position and a request (from a list made depending on nearby resources) for specific resources (be they wood, food, metals, glass, pottery etc. also you should be allowed to be more specific if required (ask for specific kinds of wood, steel, metal or certain crops, etc.). When you do this the dwarf will then make a "request" it will ask for certain tools, certain items and a team of 6 dwarfs that fullfill certain skill levels (depending, again, on the type of colony that you sish to build). You then choose items, much like when you build anything, that fullfill the request. You also choose dwarfs (much like when you create a squad). When all requirements are fullfilled, you allow the dwarfs to leave, at which point they will build a caravan (or just line up in a file), grab all apointed items and leave of the edge of the map. You can give the caravan more resources and dwarfs, which increases the probability of a bountiful year.
After the first year, every year the liason (a noble you have) will go and visit all your protected colonies. (Let's make it one liason for simplicity and gaminess). Depending on if you've given help to the colonies (asked and unasked for), how dangerous the settled area is, how well trading has been working, and just plain luck diferent kinds of years might happen:
Bountiful year: The colony has done excelently, it has grown (which allows it to trade greater amounts of material and offer them at a lower price thanks to supply-demand mechanics) but also created excess riches. It will generally send a tribute back to the home city.
Great year: The colony has done greatly, it has grown. Depending on how much it feels it "owes" the player (sending help or gifts builds relationship, ignoring requests for help or making demands destroys it) it might or might not send tribute.
Stable year: The colony has done well, it remains the same size. Depending on the relationship it might or might not send tribute.
Bad year: The colony has done badly, it remains the same size though. It will not send tribute and will trade less that year.
Terrible year: The colony is suffering, it has shrunk in size (offers less to trade and prices increase through demand-supply). It will not send tribute and will also trade less that year.
Disconection: Due to a siege or simply because the colony is too small (maybe less than 7 dwarfs?) the colony could not be reached, or there was little to reach eitherway. No trading or requests possible. You can, though, send help to the colony so that it can grow again.
Dissapeard: (This can only happen with a year previous warning, allowing the player to send help and save the colony if necesary). The colony is gone, destroyed by invaders, the natural forces or maybe from within (just like player fortresses!) and is no more, the player can send a team of dwarfs to reclaim the lost colony (it works much like sending them to a new one, only they ask for more soldiers) and try again.
Moreover every year events may occur on the colonies:
Invasion: The settlement is attacked by invading forces, be they goblins, elves, etc. As expected the colony may become unreachable until helped.
Artifact: A legendary artifact is created at a colony, this though happens on a much rarer scale that at the player fortress. The colony grows in fame and will surely grow next year!
Attack: Much like invasion, the settlement is under siege, but this time from a mega-beast or such. The colony may or may not become ureachable but will have a terrible year if not helped.
Bandits: The fortress has a bandit problem. Part of it's production is lost and you may loose part of your trading or tribute.
On resources colonies would seek to always sell the most processed item, this is:
Sand < Raw Glass < Glass Blocks / Glass Furniture
Hematite < Iron Bars < Iron stuff < Steel Bars < Steel stuff
etc.
Generally colonies try to build as good an economy as they can and will try to proccess as much of their material internally before trading. This is actually good, since players must have a larger military to defend all their colonies and couldn't sustain all industries as now.
This requires that you help the fortress. The liason's noble screen informs you of all requests of nearby colonies and you can at any point offer to fullfill them or ignore them (after certain time they are considered unfullfilled). You can also send items and dwarfs to fortress, by arranging them, much like an expedition, but instead sending them to an existing colony, this items will boost the settlement's chance of success and the relationship with the fortress.
You can also send squads or such to defend, when this is done they will leave the map for a season (or more depending on the distance) and return, with tales of their success or failure (worst case no one returns). They gain levels and skill as you'd expect them too, but their fight depends on who you choose as squad leader and which dwarves you send. You will need a bigger military, but industry should be much smaller with the caravan arc forcing fortresses to specialize, you'd depend on the colonies for resources.
Also you can request, either squads or resources from cities, they'd give them to you for free if the relationship and status of the settlement allows for it.
OTOH your protecting city (be it a barony, the capital or such, depends on where you settle) may also send help if you are under siege or have a forgotten beast attacking. They'd decide to help depending on the evilness/savagery of nearby lands, relationship with protecting city, and how much help you need. This is mostly to help new players settle nicely, but it'd also help deal with non-player bad luck. Pro fun-loving players might choose to simply ignore the liason from the protecting city and not recieve help, or if you are a noob you can send large amounts of tribute but ask for a lot of help. Also protecting cities might do requests for squads or resources, much like you can, and relationships must be mantained.
When your fortress upgrades (when a baron or count or king comes) your area of influence grows. When you choose a settelement, it chooses the area relatively close to your fortress. When you become a baron you can send them further still. As a barony you deal with your colonies and the towns in your barony, the towns may grow their own sprawl to maintain themselves, and hence may give even more resources. When your fortress becomes the capital, you deal with your colonies, the towns of your barony and also with the cities of your nation which, again, are even bigger than towns.
Now for the military aspects of this:
You should also send forts or military camps to be made. They are smaller, don't make any resources, but host squads and gives them a bonus on nearby attacks. This forts and camps allow for sustain siege of enemy cities (more on this later), trade blockades (or tax charging), scouting and defense, etc. They are a lot like settlements, except they work mostly through tributes and requests, and don't send a trade caravan. They mostly work to mantain military control of certain areas that are away.
Also you can send raids, or even invasions of enemy cities. You can raze a city to the ground, or conquer it, and mantain it as a nearby settlement. The cities you can choose to invade (which may start wars) again depend on how important your settlement is for your nation.
Wow, that's a lot. I wanted to add some screens of how an interface would look, to also explain some of my points better. I might do that later, but for now I'll post all this.