This sort of error would show up in your log files, if you turned those on. You might want to do that, for future issues. (To turn them on, go into the config.ini file in your user directory and set the line that says "LoggingEnabled=0" to a 1.)
But back to the original point, while that change would reduce the distance between cities, you need to be aware of what that'd do in practice. Yes, there are times when you'd want to cram cities in tighter, especially in a Scenario, but in general gameplay this'd kill the AI because of how he weights the desirability of possible city settlement sites. The AI's site-selection method doesn't really take into consideration how much overlap there'd be between cities, which you'd be drastically altering.
You can adjust this to compensate, by altering this block in Defines:
Code:
<Row Name="CITY_RING_1_MULTIPLIER">
<Value>12</Value>
</Row>
<Row Name="CITY_RING_2_MULTIPLIER">
<Value>6</Value>
</Row>
<Row Name="CITY_RING_3_MULTIPLIER">
<Value>2</Value>
</Row>
<Row Name="SETTLER_EVALUATION_DISTANCE">
<Value>20</Value>
</Row>
<Row Name="SETTLER_DISTANCE_DROPOFF_MODIFIER">
<Value>75</Value>
</Row>
The first three numbers (12/6/2) are how it weights each of the three rings' hexes. So it takes the values of the six first-ring hexes, adds them, and multiplies by 12. Then it takes the 12 second-ring hexes, adds them, and multiplies by 6 (which makes the second ring total comparable to the first ring in value). Then the 18 third-ring hexes, multiplied by 2 (totaling about half of either earlier ring). In other words, 40% of a city site's value comes from the first ring, 40% from the second, and 20% from the third. With the vanilla game's minimum distance this makes sense, as the first and second rings will pretty much always be used by that city, while the third ring will often be shared with other cities.
But if you're making it so that cities overlap more, then you need to lower the second- and third-tier ring values, since it becomes far less likely that a city will be able to use whatever hexes are in those rings (as it'll be sharing those hexes with more other cities). So that 12/6/2 might need to be more like 12/3/1 (which translates to 58%, 28%, and 14% for the ring totals).
The last two values I quoted deal with how far away the AI is willing to look for new sites. It'll consider any site within 20 hexes as a possibility, but it heavily favors those near enough to be easily connected and defended. If you're lowering the minimum city radius, then the AI will be very inclined to settle as close as possible, creating more overlap in worked areas, even if it doesn't really NEED to be that close. So you might want to lower the dropoff modifier and raise the max distance.
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Now yes, I know that you're basically just undoing what they did in a recent patch, when they killed ICS by increasing the minimum city distance. Obviously the AI wasn't horrible before that point, but it was definitely having these sorts of issues back then.
