Expansion should in my opinion bound to milestones allowing you to claim more regions as "core".
I really like that idea. The UI might be a bit tricky, but I think it's worth an attempt.
I think you'd need more systems in place, like happiness or diseases, before an adequate soft-cap can really be implemented.
That's one of the plans for settlement happiness. Settlement size would decrease happiness. As settlements grow larger and larger you'll have to acquire more and more luxuries to keep the population satisfied. Diseases would be another good (and historically accurate) way to soft cap populations.