Truly excellent thinking!
I agree with you that this does actually make for a fine abstraction of blockading and piracy. Neat and simple.
I think ships should have to issue a special 'blockade' order which would end their move and render them inactive until disturbed (similar to, or just the same as, the old 'sentry' order, which I am missing very much in Civ3). Thus they could only maintain a blockade while in that state, and not just by passing through the area.
Maybe blockading range shouldn't be too big... how about simply saying that all the coast tiles next to the city should be visible to your blockading ship(s)? Simple enough. Thus you would sometimes need more than one blockading fleet, especially if you want to keep your blockaders away from the enemy's land artillery.
Come to think of it there is another form of blockading in Civ3: enemy occupied sea tiles cannot be worked. But that's really not enough to make it worth the while, of course.
People are very right to criticize the current state of naval warfare in Civ. Although I appreciate the many improvements in the game, I regret that Firaxis did not after all put any substantial effort into this aspect of the game. Currently I'd rather just play Pangaea so I can forget about the whole mess!
In the games I've played so far I usually end up building no ships at all until I get Destroyers, or better yet, Battleships. Colonizing islands is less worth it than ever given Civ3's corruption levels (which I generally am not that opposed to, btw).
Age of sail is almost non-existent, as the Civ-tradition goes, and Battleships are unrealistically powerful (perhaps mostly because the AI doesn't know how to counter them).
Okay, I should stop repeating other people's criticisms
I really think we have a good idea here, GI Josh

Maybe Firaxis thought of it already but decided not to include it because the AI would never learn to exploit it the way the humans would... Damn it, why do we have to be so smart!?
