Myself, I prefer to write it as:
Code:
<GameData>
<Defines>
<Update>
<Set Value="2"/>
<Where Name="MIN_CITY_RANGE"/>
</Update>
</Defines>
</GameData>
Regardless, there's a problem with lowering the value. Having it at 4 is NOT idiotic. The AI's logic for determining how to grow a city runs into problems if you make the minimum range too low, because it doesn't adequately consider whether a tile is already being worked (or will EVENTUALLY be worked by an expanding city) before deciding whether a site is worth settling on.
Basically, the logic goes like so:
> Calculate the Value of each tile. This Value is a combination of the unimproved yields on that tile (X points per unit of food, Y per unit of production, etc.). Strategic resources add a bonus to this number.
> Take the six tiles adjacent to the prospective site. Add their values, then multiply by (I think) 12.
> Take the 12 tiles in the next ring. Add their values, then multiply by (I think) 6.
> Take the 18 tiles in the third ring. Add their values, then multiply by 2ish.
> Total all of the above up. This is the total tile score for each prospective site.
> This is the increased based on other factors, like +50% for being on a river or +25% for being on a coastline or something, and a few negatives as well (being too close to another empire, being too far from your capital, that sort of thing).
That gives you the final score for that site. Hexes with the highest score are the ones the game will suggest to you as sites, and they're where the AI will settle.
So this should illustrate why lowering the minimum range too far is bad. If the best tiles are where your capital is (usually true, since the game seeds resources around your starting site), then the sites with the best total score will be near your capital, despite the fact that most of the tiles in question will be worked by your capital, either now or down the road as population grows. Right now the only thing that really stops the AI from packing cities in as tightly as possible is this minimum range. (Down that road lies ICS.)
A minimum range of 4 means that the first two rings are unique, and can only ever be worked by that city, and even the third ring only slightly overlaps. If you set the range to 2, though, then city B's first ring would contain one second-ring and two third-ring tiles for city A (and it'd be sitting on another third-ring tile), while its second ring would contain one first-ring hex from A, two second-ring, and two third-ring hexes. The third ring would take even more (another two hexes from each ring.) That's a pretty big chunk out of A's area (15 out of 36 hexes being overlapped), and this horribly skews the value math I gave above.
Even the 3-hex range that was the original default was problematic for this. The second-rings would still overlap, barely, and the third rings were a bit worse.
Now, you can get around this somewhat by lowering the values for the third-ring tiles further, and/or increasing the first-ring values, so that the AI will be more motivated to move further away. But that's bad, because the players DO know that they'll eventually reach those third-ring hexes and so will consider a site to be a good long-term investment if it's got a bunch of useful resources in that third ring.