Nathan, I admit I have a weakness for this game as well. What makes it particularly appealing to my sensibilities, as compared to to Simcity which I used to play, is its institutionalist approach to development. Unlike in Simcity where everything is about industry, commerce and taxes - in Civ cities do not disappear when you neglect them - they grow slower, people may get upset and rebel - just like in the real life, rather than to move to the suburbs like in the neoclassical fable and its poor immitation in the US life.
The selection of government styles you mention is problematic, but not because of its propaganda effect, but false causality. In real life, politicalsystem is the effect of material conditions, mode of production, etc. not the other way around. You cannot improve productiovity by simply switching political systems. On the other hand, the institutionalist leanings of Civg show to some extent here - you really have to build a certain social infrastructure to be able to successfully switch to republic or democracy.
In any case, it is an excellect strategy game - a lot of good insights into geopolitics.
wojtek