Well, first off they couldnt do that for the 3 city states at all. Sure the high level players would have fun, but unless it zoned you into an instance by automatic, you would have a bunch of bodies lying on the floor. Let alone, for that time the city was occupied, how would you go along your usual daily routine.

HOWEVER, genious idea as it is, merely putting it in an outer city, like ishguard, or whatever its called, would work just fine.