Well, first post for Civ 5, so after a glass or two of fine wine I thought I'd make it interesting.
Actually, I don't feel they are that much of a disadvantage so far.
Egypt was on a long arching island, with 4 cities. I sent my troops after Memphis in my first big assault on a well defended city (and wow, really impressed at what a good Navy can do in Civ 5!). Ramesses immediately sent all the reinforcements he could muster across the island, eastwards towards the mountain stronghold of Memphis. As I didn't manage to secure my landing places quickly enough and secure the key choke point I had in mind, I decided to try and persuade another civ to join in the 'festivities'. My old mate Bismark was happy to oblige (after I convinced him that it was in his interest) and made a modest but valued effort on the southern beaches. Also, Ghandi (who came up with the whole idea for this venture in the first place) eventually sent a formiddable armada in from the North, but in his own good time of course.
As a civ4 veteran, I arrived with a reasonable advantage of superior units: a few frigates & caravelles, some knights & companion cavalry, and one very experienced rifleman that had already single handedly conquered the city state of Copenhagen (thanks to what must have been alien technology found in some lost ruins back during antiquity). Enough for a reasonable chance of success at claiming Memphis I would have thought. Oh,and a great general to co-ordinate the assualt into the hills from the safety of the plains below.
Well, Memphis fell pretty quick. I even had to race Ghandi to the city walls so that he didn't get it first. In fact, I discovered that my Frigates were so good at mopping up the countryside, that I decided to march on towards the neighbouring city state of Hanoi, which was under Ramesses' protection. Hanoi quickly made peace with Ghandi and Bismark, but inevitably fell after the frigates cleared a path for my small but advanced army.
Following the fall of Hanoi, Ramesses came to the conclusion that his immortal divine rulership might not be so immortal afterall, and offered me Heliopolis in exchange for peace. That's a first mind you. I never saw a leader in Civ4 offer up a city in what seemed a very reasonable act of self defense in the face of convincing odds. Civ4 always seemed to spit in my face even when their last warrior was surrounded by tanks. Perhaps Civ5 leaders have less pride...
With only his capital now remaining, I thought Ghandi and Bismark would finished poor Ramesses off. Well, despite their initial enthusiasm, my two allies managed to achieve sweet FA during the course of my peace treaty with Ramesses. Perhaps Ghandi was distracted trying to sort out the Commonwealth Games in Dehli or something. So, as soon as the treaty was over, I marched into Thebes as well. Lol, maybe that's why the Civ4 leaders never offered up their cities for peace?
So, back to the topic. Whilst I had some spare happiness (4 or 5?) and the economy was doing okay when I set sail for Memphis, I really hadn't planned on the outrageous success that in a relatively short space of time delivered me not only Memphis, but Heliopolis, Thebes, and Hanoi. After Memphis fell, I thought I'd install a puppet goverment just see what they are about.
Happiness took a small hit, gold went up a bit, I got a strategic resource, and mostly my economy didn't change much. It was pretty much the same story for the other three cities.
So I now had a puppet nation of 4 cities on a long stretching island that conveniently wrapped around the North end of Germany. Funnily enough, despite our shared adventures Bismark has now had a slight change of heart in terms of his attitude towards me...
Now, if I were to have gone and annexed all of those cities, my economy would be in ruins. Unhappiness would be a serious issue and I would be devoting all of my resources to trying to get out of it. But, as it stands, I have managed to obtain a considerable strategic advantage whilst improving my economy in the process. Happiness is similar to where it started (maybe a little higher thanks to some luxuries), and gold is also up a little. Let's be honest though, I could use some more of both, especially if I have any intention of annexing the puppet nation.
I take a look at what they are building and it just happens to be theatres, colosseums, banks, harbours.... pretty much exactly what I would have ordered myself. At the moment, I'm thinking, what do I have to gain by annexing them? A big slug of unhappiness? The puppet nation seems ideal. It gives me the resources, gold, and strategic benefits I need, without sending my empire into ruin.
Eventually, I annexed Memphis for strategic reasons (I wanted to buy a tile with Dies on it before Ghandi's culture claimed it, and it was a potential high production facility close to the shores of India). However, I only did so once the puppet governor had already built a number of happiness and economy enhancing buildings, and I had sufficient funds to buy the courthouse outright. The military victory comes first and then the puppet government gets the local economy back into shape until it looks like a good enough investment to warrant annexing. Seems a very nice way to go about conquest.
So, to cut a long story short, the puppet government seems very useful indeed. At the moment I have every reason to keep it as such for the other three cities, even though happiness is now up in the twenties. Unless I specifically need those cities to produce units, buy tiles, or some other special need that can't be better met by the rest of my empire, I essentially have every reason NOT to annex them.
Thoughts?
BTW: I didn't like Civ5 at first, it felt dumbed down and made for consoles. But, I think I've changed my mind. They've streamlined and improved the core gameplay. The flavour, character and complexity is noticeably missing in comparison to Civ4BTS+mods, but that's where I think the DLC will come in and just might make this game great.