This is a brief distillation of advice I've received so far. I'm looking forward to disagreements and additions.
For terrain there are two considerations: Resource tiles and defense. The best defensive option is a mountain surrounded by plains. Second best is a mountain surrounded by other mountains. This particularly applies for hoomans and elves. Dwarfs and orcs may get along ok in forests.
The best resource tile distribution is PROBABLY a 6 or 7 food tile with relatively even distribution of other resources (if you want to specialize the city in a particular way, pay attention to the resource consumption of the tier 2 buildings). You want to be near a high food spawn spot (e.g., dolmen) and have good secondary sov consistent with your goals for the city, like saddle sov for a diplo city or infantry sov if you want to do infantry.
Ideally you want the first city located within 50-100 squares of the second city. Most people don't put them closer than 5 squares of each other.
However, please note that there are many successful vets clustered cheek by jowl on poor sovereignty with low food spots on terrible terrain. Location is not the only key to success in Illy.
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