That indeed is an interesting theory ole sarge. I've had a terrible time trying to accept that all of the races would join one of the two cities. It's something that's been bugging me since way back when it was announced. Tierdal moving into freeport....even worse trolls. Ogre's with their new found intelligence choosing to serve under a human, and worst of all the Iksar. Not to mention the good side...dwarves leaving the comfort the underground to live in a city. I can understand the halflings, barbarians, and erudites, but have a harder time reconciling that for the kerran's, dwarves and high elves.
As you pointed out many races (albeit hostile races) survived just fine without the safety city walls. From dwarf to ogres, any of the races could have built settlements, and expanded on that to eventually rebuild cities. Remember the coldian (sp?) dwarves of Velious. They found themselves in foreign lands, where enemies were bountiful. If something wasn't trying to eat you it was trying to kill you for the sake of it. Yet they managed to build an icy city. I have a hard time digesting that the shattered lands are more hostile than what Velious was.
The bottom line is that I've always seen it as a time limitation the development team had. I don't think they could have built multiple major cities with the time they had, and thus decided to take this route instead. Makes me really feel sorry for Vhalen. He's no doubt had to work really hard to come up with Lore that would make sense of it all...no easy task when you have customers who played EQ1.