Well, I don't know for sure by any means that they wanted to limit the power of ICS in civ III. However, the corruption model does have that effect. Settler cost also went up, which seems another indication, since it makes it less feasible. I do recall reading on Sirian's Great Library that people knew that ICS had more power than any other city placement scheme in civ II before civ III came out (he wasn't involved with the developers at that point). I'd guess the designers knew this too.
With respect to civ history, you might find T-Hawk's comments interesting.
With respect to civ history, you might find T-Hawk's comments interesting.