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actually, there are 2 options there: 1 allows you to upgrade creatures in any castle if a dwelling of a certain level has been built and upgraded, regardless of the faction; the second script allows you to upgrade castle creatures into "neutral" creatures: gremlins-santa gremlins, zealots-war zealots, zombies-mummies, steel golems-gold golems-diamond golems, grand elves-sylvan centaurs. If you have a dragon hero, you can also upgrade wizards into sorceresses for free with these options.
P.S. Santa gremlins and gold/diamond golems are not tied to the tavern, so with such an upgrade, you will have creatures of 3 alignments... be careful;)