Your social engineering ideas are interesting, Aussie_Lurker, although I am not quite sure how social engineering in the UET II will work yet, so I will kind of let that issue slide for the time being.
Now, allow me to address the eight points you have brought up:
1. Yes. Determining crime, corruption, and waste in percentage terms will allow smaller empires to get away with higher rates in that absolute production is less severely affected. Thus, this should work to curb expansion.
2. Each citizen has a basic demand for 2 food and 1 shield, with 1 food being consumed, and the remaining 1 food and 1 shield to contribute to local development/growth. When a city is not producing enough food but is too poor to buy what it needs, crime may intervene and seize food supplies that may be passing through the city, to prevent starvation. This dynamic becomes more pronounced, however, when certain other commodities (i.e. drugs) are exposed to the population and demand increases until it becomes very difficult to supply a sufficient amount. Government regulation of certain commodities may also limit supplies and lead to unsatisfied demand that encourages crime.
3. This brings up the issue of unemployment, which is a factor I had accidentally overlooked. I will need to see how I have defined unemployment in previous sections to specify the effects, but unemployment should definitely increase crime.
4. Since illegal trade is a manifestation of crime, then crime is not caused by illegal goods, but rather the other way around. Rather than say overpopulation, I would say that high population densities would lead to increased crime (remember that the UET II's population model is not the one-squares-holds-all model of Civ). Distance from capital, however, has no effect on crime, because crime primarily refers to illegal activity occurring at a local level--corruption involves government and corporate embezzlers. I don't know about foreign nationals causing crime though.
5. Crime will only lead to the loss of
taxable products, and therefore will not affect city income, but rather will damage government revenues. Perhaps city improvements can take damage from crime (although a hit point system would need to be worked out for city improvements), but crime does not affect population size--murders never amount to a demographically significant level!
6. Government type, distance from capital, and number of cities are the primary considerations for corruption, although the effects of corruption are amplified with too many tax collectors. Corruption actually contributes to crime, as corrupt officials spend their money on illegal goods.
7. Corruption has no effect on the effectiveness of "wealth-enhancing" city improvements, since they do not directly increase "wealth."
8. Waste is caused primarily by technology and education levels, although the idea of "technology improvements" is quite intriguing. I also like the idea of wasted production becoming pollution--or why not just call it waste? I suppose waste could appear on nearby unsettled squares, where it would not affect the citizens that produced them, but should that not be possible due to high population densities and urbanization, then health levels would decline as a result!
Overall, these are very good ideas!

I will be making new sections incorporating these features as soon as I can find time. If more ideas come up, or you would like to comment on my points above, please don't hesitate to do so!