In regular Civ3, you have always needed rubber for Infantry. PTW Introduced us to Guerillas, 6/6/1 that upgrade from Medieval Infantry, and require no resources to build.
Currently, however, the code doesn't allow buildings to morph. Maybe it could be done, but as buildings don't have upgrade paths. . . plus it's a little hard to get around the anarchy. It might be possible, tho, but I've never tried it.
As for losing the buildings when you change gov'ts, well. . . you'll just have to decide if the new gov't is better suited for your civ than the old one. That really goes for all gov'ts, not just changing out of Democracy. And keep in mind that the democracy in DyP is not the Democracy in PTW. It is more along the lines of an 'ancient' democracy, not a 'modern' one.
And I'm pretty sure it's still electricity that allows irrigation without fresh water.