I don't remember any references to damp sand. Polar ice on the other hand is mentioned - see
this post.
On
the book map, you can see a small area marked 'cap'.
Settlement at the pole is confirmed by
this quote also taken from the first Dune novel.
So industry at the polar is supported by the fiction, albeit the polar factory is probably the equivalent of our Ice Extractor improvement. Also, the fiction points to the fact that an upper class have residencies at the pole.
It doesn't describe major cities granted, but I'd argue that on Arrakis this terrain is some of the least hostile and desirable available. However, I do agree that there is something about the polar super-cities that is a bit strange. This is probably because the major cities in the book, Arrakeen, Carthag, etc are not within the actual polar sink area.
We want the polar area to be contested even if cities aren't built there, so how about this as a completely different approach to the polar ice.
1) Cities no longer buildable on Polar.
2) Allow Ice Extractors to be built outside of cultural borders.
3) Ice Extractors create a +1 square of culture around them using JCultureControl. (If the Ice Extractor is pillaged then the culture will disappear.)
4) Set iAIObjective to 1 for the Polar Ice bonus (if not already).
5) Implement
building effects scaling with number of bonuses and create Water Shipper Building +2 water per Polar Ice consumed. (Controlling the Polar Ice cap will provide a water benefit to all your cities - which is probably closer to the fiction)
Apart from (5), it is simple enough to set this up and see how the AI copes.
If its just the city size that bothers you, then change the tiles from 2w to 1w1h, and let some of the various bonus resources spawn there.
I think this is decent alternative too.