That's right. You're not missing anything.You allow city gifting, even though it would end in disqualification??? If you gift a city and recapture, won't it get razed being OCC? And you won't have any captured cities to gift. Am I missing something?
No need to make a rule against gifting cities.
No one will be disqualified for giving away a city. They will instead be disqualified for not having seven cities with required buildings.
edit:
Unless any of you can think of something we haven't - please let us know!