Sure, you can found cities on jungle in Civ4 without Iron Working (even though that doesn't make much sense either), but being able to found cities on Xenofungi right from the start in Planetfall is just plain weird, as iirc Xenofungus is quite hostile terrain. Is it supposed to be this way? I can't imagine you were actually able to do this in SMAC, but I could just as well be imagining things already as it is. Thoughts?

With a tech, maybe?

Exactly. With the Xenobiology tech (or whichever tech allows you to remove xenofungi).

You indeed couldn't build bases on fungus in SMAC. However that would be rather annoying if you were playing an eco-friendly faction, were planting extra fungus yourself, and then that fungus naturally spread to a tile you were planning to build a base at. Considering there's no way ATM that I know enough to only let bases be buildable on fungus for factions that are eg running some eco-friendly civic, I just let bases be buildable on fungus for everybody.

Bases only being buildable on fungus starting with Xenobiology sounds like a good idea, though I consider coding this in a low priority compared to other priorities. Especially since Xenobiology is an early game tech anyway, so it wouldn't make that much of a difference.