Granted I am not the best Civ IV player (and this may be one reason why), but the flood plains don't produce that much unhealthiness, and unhealthiness is relatively easy to counter. Imagine financial + cottages on those flood plains... Especially nice if you want some specialists to go along with that city. This is a very nice city spot. Besides, when you get calendar, you have 3 resources in the fat cross. You can whip buildings that you need... I whipped library once it would only result in 1 unhappiness, and can easily whip granary and other health-improving buildings to compensate.
Sure, your capitol (at least temporary capitol) will not be a production city, but you can always move it later. What a sweet city spot... But it's pretty quick to move your capitol to another better-producing city or coastal city later, and it only ties up one city's resources, not your entire empire's resources.
My initial play of the test game was promising. I was researching much faster than any of the AIs because I put cottages on three flood plains very quickly, and now they are giving me 5 commerce per turn, my capitol is producing massive quantities of commerce (in the BCs still, around 800ish BC, and I get 28 beakers from this city alone per turn, and I am building a monastery so it will go up more), and with 5 cities I still can expand and not violate the "60% rule" because I am also getting great gold from the commerce)
I missed the no barbarians thing, I almost built great wall but decided against it, glad I didn't go through with it!
