You forget a third choice, selling them.
Instead of razing them, I sell them to AI to put some more trouble in the region, mostly for gold to upgrade my troops. This AI I sold to will be guarded, so I sold, or give them sometime, to low AI I already kicked. I don't mind doing it again if I have to. These small civ fight each other while I try to put some on my side for further research and ressource agreement. Meanwhile, I go after the biggest one. That's what I do at emperor.
Catherine offer me peace with maybe 10 cities, I couldn't clearly keep them all, so I sold some and give other to form a buffer.
