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While heroes seem not too bad, definitely never go over your city cap. That penalty is severe.
It depends. A good hero brings often so many boni to a city that they easily make it up for by just being there.
In the late game if you're already running a big empire and doing well you can more likely soak that whilst maintaining advantage.
Map size is also going to come into play; bigger maps and more resources means more chance that you can soak the penalty without hindering your advance.