Majesty has never been a simulation game.
Nor a RTS. So why should it turn in one?
Odd people still play it 9 years after date and it got such a huge fandom then...
Now with that said, its a stupid suggestion because the game is not built to handle it.
Yeah? Not quite so it looks to me. But let's take your "impossible" stuff, think about it for 5 seconds, then make a suggestion that can easily work in the current MFKS2 framework:
A fair few monsters being able to one shot most early game heroes
Actually, I think heroes level too fast and become too strong too fast, and most monsters are too weak. Lowering XP for heroes and making monsters stronger would be my desire. And nerf those darned Rogues darn it!
Fine, you got an issue here.
Why can that not work with self-hunting heroes? Hell, with them being pro-active, monster spawn might even be increased to keep the map populated

.
Looks fine to me. Well, besides the 100% return of hero spendings. But changing that has little effect on the game. I wonder how making heroes being pro-active changes the economy severe. Or do you mean you no longer need to spend 2000 gold to have a map explored? See how fast the increased deaths of rangers take that from you again...
Including but not limited too increasing the income
Okay... as said above, why? After all, as you say it flags become "useless" (not true) and thus you still have more money regardless. What do you have to spend so much more on with pro-active heroes. Well, besides Fear flags...
reduce the monsters strength down to a heroes level
Or increase it so they aren't so darned f**king weak.
Okay. Why? What does hero activity has to do with item bonusses?,
completely change the health potion mechanics
Congratiolations... another why? Are you opting for making it "like MFKS1" or do you just say this because you expect it to be turned into an exact MFKS1 clone?
The current method is an improvement upon MFKS1 and works well within the frame, even with pro-active heroes. Why the hell do you want to switch it back to the old model?
Or... increase them to re-act to the more active heroes. Or just keep them the same. Lairs are pretty much a no-factor in MFKS1, their working in MFKS2 is an improvement. And would work with heroes who also simulate lives besides fighting.
increase building toughness
Why (yes, there is a trend growing here)? Buildings are pretty much as tough as MFKS1, they just get attacked WAY more often here. Good job on asking change on something that hasn't been changed at all...
and generally rebalanced the entire game from there along with developing new AI to drive it all.
Because warriors actively seeking out foes, rangers exploring, dwarves drinking and healers planting herbs is going to make the balance completely freak out. Sure...
Such actions would replace the "seeking for adventure" routine and there you go, not less time on usefull, nor more time on "unuseful".
completely screwing the player over in the campaign with all its proximity triggers
ALL those. Let's count with me.
Bloody Offenses = "Escort. You probably wait with Rangers here anyway"
Ratman King, Commerce = Escorts can be repeated infinitely. A non-issue
Demon Advisor = Dragon/Ogre lair. Do not spawn immediate anyways.
Big trouble = I am pretty sure getting a temple earlier is a BIG pain. Oh wait; it ain't.
Then don't hire the heroes who can do that? I mean; Rogues wont (too much loot to steal) and rangers probably neither. Beastmasters rather "patrol" around them. However; Paladins could do that. But then don't get all surprised that lairs go down when hiring Paladins.
THAT'S all MFKS is about remember? Hiring the appropriate heroes for the appropriate tasks. And if hiring "invalid" ones, DEAL WITH IT!
and pissing off any boss monsters on their own
What is this fear flag I hear about? Must be an awesome thing. Haven't used it, but awesome none-the-less.
Let's see what bosses they can violently murder you off:
* Royal Feat? Nope, it's fixed arriving and going.
* Ratking? Same. A too early caravan escort might trigger him too early, but it never arrives your kingdom without escort.
* Demon Advisor/Skeleton King? Njet; Fixed to attack you on day 80.
* Balrog? Well, it can... but that's not because of your heroes. If you remember the quest. Fighting some lone hero might actually give you the recharge time you need to charge the Crown to actually save your town!
* Drakk of Bloody Offenses? Yeah, SURE. All that single hero has to do is fight 30 vampires, beat down 3 castles and then some. Guess Drakk posses a real threat to that one!
* Ancient Lich? Stuck on her/his corner of the map.
* The Big Trouble? Congrats, the one and ONLY map where self-exploring and pro-active heroes can cause you issues. But if you don't use a fearflag, you pretty much ask for it anyway.
Well, great argument! Let's not improve the heroes because one boss *might* pose issues but ONLY IF you do NOT utilise game-functions.
completely voiding the whole point of the flags and any need to use them like the first game.
You mean like that Fear Flag thingie I have yet to use, like, EVER in my entire game-experience of MFKS2?
Also, I doubt you no longer need defense and attack flags because of this change.
Explore flags is another matter. But their intention never was to have them be placed all over the damned map just to explore it. It's function was just to explore a certain section faster (there was another function for this, called "Farsee", it was a Wizards Guild spell). Which it can still do in MFKS2. I don't see how forcing to use them improves the game-experience at all.
TL;DR version: Heroes could be made more pro-active and with more personality within the current framework of MFKS2 without too many other radical changes. Like somehow other people think are necessary.
Planting plants doesn't take hours you know, and besides, the more aggressive warriors fill the protection void that causes. Win/win to me...