Masklings rebuilding could be tricky. From a technical standpoint it'd be pretty straightforward, but from a gameplay standpoint I could see it devolving into a tedious game of whack-a-Maskling. I've been toying with the idea of shipping experimental features as mods, so you could toggle them off and on, and this might be a good candidate for that.
I agree that end-game challenge is currently a major problem. Mostly, I think, because there's little getting in the way of player growth, and Maskling growth is capped. The Morale update should partially address this, as will the Nobles update. Long term, though, there needs to be a larger, more threatening enemy.