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Best town units are crossbows militia and spear militia, don't bother with other town units. Hope this helps.
Towns can add useful units depending on the faction or generally have some useful late game stuff too. Some factions don't need castles, like the milanese. But it's really up to you.
One of my experiences: as england I turned notthingham and caen into a city because they are port settlements and yada yada.. eventually i had to conquer france with militias and even when the area was consolidated, there still was not a point for recruitment in case of danger.
On another of my playthroughs I had castles in groups of 3 for infantry/cavalry and archers. It worked well although I think it can work with groups of 2 + some troops from cities.
But the take away is you don't need to turn everything into a city. If you already have a castle per major area, and there is a smaller one nearby, then you can consider it. But even then, a lone castle I find doesn't cover army requirements quickly enough.
Remember that once you build the stone walls in a city, it can never be turned back again into a castle. So its a point of no return.
Some things like the spears militias from cities work well enough and can be more easily replenished in conquered territory. Some militia types depending on faction also add a lot.
Castles alone allow you to recruit the very best units available during the early game and to some degree in the mid game, as well as provide some additional income. Castles are also easier to defend against more powerful opponents like Mongols.
Cons for Castles:
Income is limited and tax rates are fixed. With the introduction of gunpowder, castles become a little less relevant although can still be defended well against powerful enemies.
Pros for Cities:
Cities provide a much more reliable income and the population can be taxed as seen fit. Early game militia are usually good enough to defend against most other early game units, they are also cheap and many types can garrison a city for free. During the late game, some units will become available in cities that are comparable to those from castles.
Cons for Cities:
Poor selection of early to mid game units, usually limited to basic militia types and maybe some low quality missile units. Generally speaking, you can't recruit cavalry in a city and while there are exceptions (Merchant cavalry for example), the best cavalry available to you will always be from a castle. Cities are also a little harder to defend, especially against foes like the Mongols and Timurids.
As i take France 2 castles Leon and Marseilles rest towns usually each area 2 castles rest are towns until Denmark Norway Sweden there all towns
so chances are main ratio 2 castles for 6 towns
For instance, Sicily has good Italian city units, but their Norman knights are excellent. You need a fortress for them.
Spear militia units, specifically the ones good against cavalry, are excellent additions to most early game armies, especially since a lot of factions don't get a proper spear unit until the mid game (Poland and Russia are good examples, I think also Portugal and all the Middle Eastern factions). So while it can be a pain to replenish them it's always good to have some spears in campaign, especially if your only other option is like javelineers.
You need good income if you want to afford good units and their buildings on time, or even just to pay the upkeep on Knights or whatever your faction offers. Personally, if a castle isn't going to be close to the front lines I usually convert it since money is more important than raw manufacturing capabilities for units. Rarely will you have a situationw where you need to produce 20 units at once. If you have a wounded stack, combine the weak ones and then replenish the super low regiments.
If a settlement can have a port you should also try to find a reason to make it a city since that is one of the best sources of income in the game.
Cities can of course give you great income. If you have a safe heartland think of putting cities there. I prefer castles though.