Unless the entire battle is instanced and not part of the real map I can't really see them opening up a hostile area to players as a city State. If we have an expansion to reclaim Ala Mhigo, it would cause data confliction for those who finished the story portion and those that didn't. If we get to go there, it would probably still be under Garlean rule, but allow us to go there through a peace unity in that city or something, that could be where the Garlean specific jobs/classes could be located.

If not, no alliance with Garlean Empire, I can see it as a dungeon rather than a city state.

Also Gaius may be dead but he isn't the only one with an Army from the Garlean empire if I recall. Isn't there an emperor?