It would make defending cities impossible. If I can only have say, 10 units in a city and not get hit by unhappiness, but an enemy stack of 150 comes my way, do I stand a chance? I believe adding an initial production gold cost and more maintenance should help.
I disagree. First, you with higher happiness penalty and/or higher maintainance, you will be far LESS likely to see a stack of 150.
Moreover, if unhappiness starts at 10 units, that means a well-planned city (which may, for the sake or argument, have 10 more happiness than unhappiness and additional military units cost -1 happiness penalty) will be able to 20 military units without any problems.
Moreover, it will mean that you want to fight the enemy OUTSIDE of your city, (as people do in real life) since otherwise your city should receive battle-penalty and maybe half of your buildings would get destroyed with civilian life-loss.
MOREOVER, it makes battles much more stretegic, you can't just let everyone sit in the city and wait for enemies to come.
MOREOVER, forts are still rather useless right now, and this penalty would change that; it will be important to build forts where you can station your troop, for now city is no longer the heaven for defense.