That's an interesting limitation.
My attitude towards city conversion is strongly negative, but in the context of such a limitation, it might not be that bad.
Although the limitations are too lenient, for example, with 16/24 cities for 2 players, it seems you can create up to 9/13 identical cities (using the formula towns/players + 1)?
I would suggest an additional limitation on dominant factions: if a player controls more than 50% of cities of the same type, they should not be able to convert their cities into that type.
By the way, would you like to implement a template for generating Diamond maps from Heroes 3?