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City spamming seems to become a problem during the later stage of the game, at least on maps with few usable hexes.
I just played a game on a small map and many cities ended up being coastal, so I had a lot of overpopulation and was suffering from food loss during the late game that crippled my army.

So I guess ICS requires at least a certain amount of available land to be useful. Still, seems pretty powerful, yes. But remember that's the release version, and CIV 4 & 5 where quite imbalanced at the game start, too. So a patch can fix it. :)
 
Enemy soldiers in your border does absolutely nothing. No unrest, no lost taxes, no lost production. You need to keep them from attacking your cities, not getting inside of your little glowing lines.
Well, if they occupy building hexes the icon becomey dark in the city overview, so I guess they prevent you from getting the building benefits (or at least ressource income).