I would love the ability to play the region, and I also think it would help with the small city sizes. Terraforming/landscaping on a regional level, ability to place cities next to one another, and placement of regional transportation would be great additions to the current gameplay. For multi-player regions, everything could be fixed as it is now, or just allow someone to be that region's super-mayor which would grant him the regional controls.
Regional transportation could just be a guide, and it would then be up to the individual cities to choose whether or not they wanted to spend the money and build the highway/train/subway/etc.