I agree with Donsig. They want the game to be over. This is their way of sticking it to Cavalieros.
I also agree with Damnrunner that if we dont accept they will make the same offer to Cavalieros, which = We lose.
If we really really want to keep playing this game to the bitter end, we could always gift some of the cities to our allies to keep the game balanced... right? However, I am not convinced that getting all of SANCTAs cities will put us that far ahead of Cavalieros. We should take the cities and see. We can always let Cavalieros come to us to request we gift cities later.
The point is... SANCTA surrenders!!!

That's GREAT!

That means we won the War! Rejoice! Let the back slapping begin!

Let's not be SORE Winners

, by demanding that they stay in the game to watch us systematically burn their entire empire to the ground. I mean honestly, how many of us stay in the game when the AI is obviously going to destroy our nation? You quit and start a new game right?
We should just graciously accept their surrender and all of their cities.
This was the WHOLE POINT of the War right? For US to get SANCTAs lands so that we would have 'balance of power' with Cavalieros. Also, We don't necessarily have to fight Cavalieros right away. We could tell them that the "CavKaz" should now destroy Saturn and MS.
Even if we did want to fight Cavalieros now, all we would need to do is switch to Nationhood and Slavery and just slave/draft a horde of cannons, rifles and Cavalry. We could even withold Military Tradition from Cavalieros so they would not have Cavalry.
Great job, War Marshall Cavscout!
Oh and

AND

everybody. It was an honor and a privilege "serving" with you

... Still wrapping presents... Ho, Ho, Ho!