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Instead of upgrading houses, I recommend having a structure upgrade system in place with stone/ore that you mine. 

With the new resources each building can be upgraded. These upgrade structure provide a set benefit

Mudbrick house - 1 pop

Stone house - 2 pop

Mudbrick Bakery - 1 food per whatev.

Stone Bakery - 2 food per whatev.

You can also incorporate the advance structures into mining. By this I mean you need stone to build a temple, it cannot be done with Mudbrick.

 To get Nobles, you must build a city centre of stone, which will attract migrants and allow you to upgrade your villagers.


Side note: what if there was a traveling merchant camp? A merchant would occasional come to a settlement with a trade yard (or depot) and trade resources with you? 

I like the idea of travelling merchants. An eventual goal is to have trading outside your tribe.

Structure upgrading is planned, though I wasn't thinking of it for houses, mostly for defenses and farms. For upgrading houses, it would seem a little silly to have more than 1 citizen per tiny little house.

could we upgrade towers/gates/walls for higher hp? Maybe revising copper weapons increases towers attack?

Following this, upgrading towers increases the Maskling attack forces? I think that would be too complicated rgoifh

could we upgrade towers/gates/walls for higher hp? Maybe revising copper weapons increases towers attack?

I was just thinking of upgrading for higher hp, but higher damage is a good idea too.

I had another idea to go along with the new combat and Maskling tactics - will there be loot or resources gained from defeating large Maskling forces or Camps? That would be a fun way to encourage player raiding and military training

Hmm, hadn't thought about that. Something to consider though. In 1.2.5 destroying maskling camps reduces the intensity of raids, so there's a little incentive to going on the offensive.

Just another comment, how possible is structure rotation for construction? for example, select towers then rotating the direction 90 degrees with Q and E before placing the foundation.

(+1)

For towers and gatehouses it would be easy, since they already have rotation information. For other structures it might be possible, but would take a lot of art work. It's a highly requested feature though.