Im currently working on the Active-Neutral functionality, so here is some feedback so far
Not all cities will be Active, only cities that belonged to a resigned human player will be set to Active.
Units left in the city will still stay there (same way as it works right now)
If the city is empty, some units will be auto-produced to make sure it is not empty.
Units will then be produced in the Active city until one of two criterias is true:
1. The city holds X or more units (currently X is set to 12)
2. The city upkeep limit is reached (for all the units in the city). Might be upkeep*0.5 though, if upkeep is a too high value.
As for people dropping out early in the game, thats a problem we know, and in beta4 it will mainly be addressed by extending the instantjoin time to the first 3 turns (still working on that one though). In long term we are looking into the AI solution, but it wont happen for beta4 for sure.
As for self-razing all cities when surrendering:
Most players will probably not bother with this, and also there is a cost involved, so you wont be able to raze all your cities unless you are very rich