Just cause the war is not efficient anymore till medieval or so. Im not saying its impossible, its not efficient, you cant make good use of this cities, your economy is broken, and you primary cities arent growing.
My most common tactic lately is finding closest ai and archer/cbow rushing it, no matter how peaceful I want/plan to be later, even when taking Tradition. You seem to underestimate gains you get from wars. Yes, you have to use hammers to pump units instead of settlers or workers, but those are supplied to you by your target just bit later.
I really don't see problems with Domination at all. Sure, a +3gpt added to capital would be nice, but otherwise, even being at negative doesn't really factor that much if you have money from meeting CSes etc. saved up for it. You don't need any money beside 'just enough' to field army. Buyrush/bribing cs are bonus, not necessity.
People really seem to want to just steamroll enemy cities and automatically get happiness from them. After you take opponent, you need to stabilize for a bit.
Archer/Cb rush -> stabilize -> cb/xbow -> stabilize -> machine/cavalary/cannon -> stabilize -> artillery/airforce -> crush rest of the world. And I bet better players than me could possibly be warring on two fronts during some of tech periods with much bigger armies since I'm ALWAYS distracted by those shiny-shiny wonders later in the game (I built a Broadway in my last pure science game, still have no idea why... maybe I love the art for it far too much).
I also don't see problem with science penalty. As Zulu domination Immortal game, even having 12 cities/puppets still was enough for me to be leading in tech. Puppets still produce science, per city penalty eat it, but you still should get small lead in tech by it, not to mention loads of gold so that you can field bigger army.
As for settling your own cities, I rarely get to see more than 2-3 good places for expansions myself per map till there is no more space left. Of course if you're like AI and like to set them 4 tiles away from each other and on crappy terrain, it will slow you down, but is it really bad that game penalize for making trash cities?