The corruption can be so crippling that it doesn't pay sometimes to capture everything unless you are going for domination.
Machiavellian play can be a lot of fun too. Some call it a variant, and it probably is, but its basic principle is to grow big enough to stand up to the biggest AI, but create a system of dependence among the defeated AI so they can use their captials are core cities of your own. Once they fall behind, they will pay very good prices for your techs and resources.
Having a machiavellian play strat also doesn't imply small empires, as having a near monopoly of luxuries/resources relative to your clients is essential to making the most money out of them.