Yes, I've seen a few of them morph into City States. I'm not playing with mods though and I'm playing on King. Also, the progress bar resets to zero permanently when the camp is too close to an existing city however. I have noticed that the AI seems to be using the Camps to recruit units for themselves, so wars happen more quickly. There's also this weird visual glitch where newly spawned city states appear as white cities on the minimap. Nice to distinguish them from the natural city states, I supposed but rather annoying if you're playing a white-coloured city yourself.