Naturally, considering history a science it has to be open for new factual discoveries to replace the old theories, but the game world is based on the current knowledge of the history, and the settlements modelled in accordance with that.
That's not exactly right. There are some not exactly historically accurate things in the game, there are some things based on educated guesses.
Also an unproven theory that makes sense is often more popular among scientists than believing only in the things we have undeniable proof of.
There are actually quite many things that were invented and established elsewhere in the world even thousands of years before the game era but didn't quite exist
That's true, but just because it existed somewhere else isn't my only reason.
Even in the game, we have fortified settlements, we have agriculture, we have trade, we have food surpluses, we have raiding parties... That's pretty much everything that's needed for bigger settlements to grow.
As someone else already said here, trade didn't happen with random traders wandering in random areas of finland, hoping to trade with a random hunter. For both sides it is the most convenient if the trade happens mostly in one or a few places, and if that happens someone would want to take control of those places probably, there would be a need to guard them, perhaps to provide places for traders to stay for a few days, etc.
But out of curiosity, what would you consider a historically relevant population for that "small city" that would fit in the era?
As for history - I don't know, somewhere in the hundreds.
As for the game - I think it should be something that's notably bigger than a village, big enough to have a different feeling to it, and worth to travel across the map for.