Not at all because of that; if there were mages instead of humans, it still wouldn't justify having three cities, and it wouldn't change the strategic aspect. That is, the main problem is that maps with a large number of cities are usually very dynamic maps, and this map cannot be called that.
There is no extreme imbalance in this artifact, but I would remove Sandro's Cloak from the game altogether. Dark magic is already imba on its own, and this just adds to it... And in general, in terms of balance, I think it would be more logical to prohibit building an artifact shop in all cities.
That's nonsense. The concept of "knowing how to play Heroes" includes knowing how to properly develop a hero depending on the type of map. Some skills are beneficial on small maps, others on large maps, and so on. If that weren't the case, then the same universal hero development option would always win, and then the question would arise: "Why are other skills even needed if this universal option is the best?" Let's just throw out half of the skill wheel...
Adding dwellings is quite possible, and they won't create any imbalance with the Knights if you're so afraid of them (and if you reduce the number of gold mines and remove the Capitol, then even more so).
I think the Mentor can be left with one per capital city; having them on every corner is also unnecessary. I would even suggest removing all Mentors and placing one under guard in neutral territories; this would immediately increase its strategic value.
Okay, let's say I gather legions of an army; would machines still be relevant? What about Chaos, Summoning? I'm not afraid of Knights, but in this scenario, at least you need to be wary of them. Also, I want to correct you: development depends not only on the map but also on the opponent; you wouldn't be developing Dark magic without Sandro's Cloak against Necropolis, would you? It's hard to imagine an Orc without machines, but with such huge armies, this skill becomes irrelevant. A larger number of Mentors is needed so that you don't have to run across the entire map to change your build before the final, and then run just as far to the opponent.