I always liked this idea but there hasn't been a good way to implement it yet. The gradual reduction idea means those players will just quit as they are being kicked from their kingdom. The only feasible way is to halve the kingdoms (down to a size of 12) so they can create two kingdoms with the loss of one province, but this is such a huge change and we know how resistant to change we all are.
If it did happen then 1-2 ages in I believe it would be a LOT more fun. It may even be an acheivement to reach the top 50, where as now its not a stretch. As palem said, we all get sick of seeing/warring the same kingdoms and with heaps more kingdoms and diveristy it would be more entertaining. The downside is a 12province kingdom won't be an activity warhouse for irc/msn which may make it a little stagnant.