I can already see that which mod will be one of the most popular mods: The Libram of Thousand Spells

From the sounds of it, in addition to mods, expansion of the spellbook will be officially supported.  So I'm sure that some kind of vetting system for created spells will be created to determine what makes it in to "official" elemental spellbooks, and what will remain mods.

Some really cool spells in there. I especially like the 7 deadly sins enchantments.   But...

I think the spellbook needs to be better structured. Right now it seems like a bunch of books with random spells in them. Fire Elementals are in Summoning instead of Fire. Ruin and Restoration have the same spells in them. Magic domains (Fire, Life) get mixed up with different types of spells, i.e. Enchantment or Summoning spells are something that every domain should have. "Combat" shouldn't be a book of its own either since all kinds of spells are used in combat, including Fire, Ice, Ruin etc.

Having a well structured magic system is essential. 

My suggestion: separate magic domains and spell techniques.

7 DOMAINS to cover all sources of magic

• Fire, Ice, Air, Earth (4 elements)
• Creation and Ruin (life and death with possible Divine associations, Creation just sounds more epic than Restoration to me)
• Spirit (magic energies, mind magic, mana related and all things incorporeal)

Domains dictate what powers the Sovereign wields. Domains are connected to power sources like Shards. There should be a way to specialize or generalize in them as you please. Like Master of Magic.

3 TECHNIQUES to categorize spells

• Invocation (bursts of energy, combat magic, instant damage/healing)
• Conjuration (summons, permanent creations)
• Enchantment (lasting magic effects, buffs, debuffs)

Techniques dictate what kind of spellcaster the Sovereign is and how he wields his power, i.e. Summoner, Battle mage, Enchanter or Archmage. These can be talents to pick that specialize you in certain types of spells. Perhaps only choose one at Sovereign creation to make the choice meaningful.

Every individual spell would be a combination of domain and technique. The pros of this system are that you could easily create a spellcaster with exactly the kind of focus you want. Want an all powerful Fire mage who can incinerate things both on the global map and on the battlefield? Specialize heavily in Fire. Want a Battle mage who can blast away on the battlefield with different elements like no other? Pick several elements and specialize in Invocation. I'd also add a Global tag for global spells just in case. 

More importantly, these domains and techniques would cover any spell imaginable that could be added later in expansions. So instead of adding the 50th Book of Whatever you would have a functional structure to place new spells in. There would be no overlapping of spells and these 7 domains and 3 techniques would be a very clean cut imo. Simple enough yet very flexible.

Examples of spells:

• Fireball (Fire / Invocation)
• Summon Fire Elemental (Fire / Conjuration)
• Wall of Fire (Fire / Enchantment)
• Rain of Fire (Fire, Enchantment, Global) - permanent rain of fire above a city
• Meteor Storm (Earth, Invocation, Global) - calls down a meteor storm to bombard a city once
• Eldritch Blast (Spirit / Invocation) - blast of magic damage
• Arcane Shield (Spirit / Invocation) - globe of force protects caster for a short time
• Spirit Blade (Spirit, Conjuration) - summons animated blade and armor
• Charm (Spirit / Enchantment) - takes control of target unit
• Mana Flux (Spirit / Enchantment, Global) - all spells cost more mana
• Heal (Creation, Invocation)
• Summon Ent (Creation, Conjuration)
• Entangle (Creation, Enchantment) - roots entangle enemies
• Divine Radiance (Creation, Enchantment, Global) - boosts morale, weakens undead
• Drain Life (Ruin / Invocation) - steals life
• Aura of Weakness (Ruin, Enchantment) - AoE weakness on battlefield
• Summon Shadow (Ruin, Conjuration)
• Nether Gate (Ruin, Conjuration, Global) - creates a permanent gate with undead pouring through every turn
• Gluttony (Ruin / Enchantment, Global)
• Eternal Darkness (Ruin, Enchantment, Global) - lowers enemy morale, empowers undead

I too would like to see more 'subtle spells'. Things like 'mass confusion', 'dominate', 'holy light', 'counter magic', 'darkness', 'seduce', 'strong wind (affects ranged attacks)'  come to mind.

But I realize that some make it much harder for the AI to attach a value to these spells and to effectively use them.

I also agree with the previous poster who suggested secondary efffects for the direct damage spells. This would make them more interesting. Age of wonders did this nicely with 'poisened','vertigo', 'burning','stunned' etc.

I think you also need more ways to balance the reusage of powerful spells (which there do not seem to be a lot of really world changing ones anyway).

Consider making the mana regen of the sovereign an important stat and make some spells take multiple rounds to cast until you have poured all the mana needed into them. Because, as another person already pointed out, the Spell of Making taking 20 mana and instantly cast is quite anti climatic. So that powerful spell took only the same amount of mana as enchanting the farms of two towns?

What you could do is have a class of powerful spells which are not instant but have to be built up over several turns in a shard. If you interrupt, the mana already spent is lost.

a few spells fast coming to mind:

invisibility=no need ot explain

taunt (this was very cool in kings bounty and also working in mmo) =makes the unit attack who you want (like in mmo) or makes friendly unit the only target for attacks(like in KB )

exchange=(between friendly and or enemy units)

trap= place a trap on a tile on the ground damaging and or slowing who pass over it

illusion=create a fake copy of target friendly unit

bomb= place a highly damaging bomb(very high since you can avoid it) on a tile/unit exploding after n turns

duplicate= create a copy of target unit with reduced stats(maybe a % of original based on int)

wall= place a wall blocking passage on the ground (maybe lenght in function of int)

push=unit is slightly damaged and pushed back n tiles

Teleport on strategic map costs only 1 mana??? 

This is probably the first thing that I'll mod out of the game (increasing mana cost to something like 10 could work too, but I think I'll just remove this spell altogether).

It only costs one mana because I'm pretty sure you can only teleport into your own zone of influence. Meaning, it's basically a "return" spell. It doesn't let you teleport around the map freely.

You asked for it! Here are some thoughts for strategic spells.

Pack Ice:  Temporarily enchants one or more ocean/lake squares to temporarily freeze, allowing armies to pass over it. Any land units in the square when it thaws are lost.  Any naval units in the square when it's first cast are unable to move until it thaws.

Part Waters:  Enchants one or more ocean/lake squares to temporarily become land, allowing armies to pass through.  Any land units in the square when it ends are lost.  Any naval units in the square when it's first cast are lost (or maybe just moved to an adjacent water square?).

River Spirit:  Enchants a river (or specified river squares?) in the sovereign's territory to react violently to hostile forces that cross it (think of the river scene in Fellowship of the Ring).  All hostile forces crossing the river sustain damage/losses.  No effect on friendly units.

Impenetrable Forest:  Enchants one or more forest squares to become extremely overgrown and tangled, increasing the movement cost for all land armies moving through it.  (If the enchantment is invisible to opposing factions, the caster could even pick the tiles in such a way as to leave a "safe" path of unenchanted squares through the forest that only he/she knows.)

Tempest:  Enchants an area (or global?) with strong unpredictable winds.  All flying units are treated as non-flying.

Torrential Rains: Enchants an area with unrelenting heavy rain.  Terrain in the affected area, including roads, becomes a muddy quagmire, increasing the movement cost for all land units.  Rivers becomes swollen, inflicting damage/losses on any land units crossing them.  Movement penalty and river damage affects all units - be they friend, enemy or neutral.

Blizzard: Enchants an area with heavy snow.  All land units suffer severe movement penalties and sustain damage/losses.

Enveloping Fog: Enchants an area with thick fog.  Visibility range for all units is reduced to one.

Wildfire: Ignites a highly contagious fire in a single square, which can spread to neighbouring squares, and so on, up to a maximum total number of squares.  Destroys forest/grassland/etc, but cannot spread to mountains/desert/water.  Inflicts heavy damage to any city to which it spreads.  Can be extinguished by appropriate spells (e.g. Torrential Rains, Blizzard).

Landslide: Affects any square adjacent to a mountain square.  All units within that square sustain damage/losses.

Even if it only allows teleporting within your own borders, it's still too cheap imo, it makes it too easy to defend your entire territory with one strong teleporting army.

Hmm, as for some tactical spells to control the battle in more subtle ways...

Rift: Opens a crack in the ground several squares long.  Non-flying units are unable to cross it.

Buffeting Winds: The battlefield is affected by strong, unpredictable winds.  Ranged units suffer penalties to accuracy/damage/range.

Entangling Vines: Vines sprout from the earth and entangle the unit.  Unit is unable to move, but can still fight (perhaps at a penalty), until it frees itself.

Trance: Affected unit becomes distracted by phantom visions, and is unable to move or attack for a number of turns.  Attacking the unit breaks the spell.

Death Pact: While in place, the caster gains mana (health?) from every death on the battlefield.

Summon Vengeance Demon: Summons a powerful demon which needs constant control.  Caster is unable to do anything else while they maintain control.  Damage to the caster causes them to lose control, in which case the demon prioritizes the caster that summoned them as their next target.

Bind Demon: Attempts to establish control over a demon.  Could be used to attempt to regain control of a Vengeance Demon (though without guaranteed success), or maybe even steal control of an opponent's demon.

Mirror Image: Multiple copies of the caster spring into being.  These have no attack value or separate abilities, but are indistinguishable from the original.  Attacks against the caster have equal chance of hitting any copy or the original.  Hitting a copy causes it to disappear.

Wildfire: A tactical version of the spell I mentioned in my earlier post.  Starts on a single square, but spreads in random directions.

Awe: Any unit attacking the caster risks being overcome by the caster's perceived magnificence and is unable to attack them.

I still think it should be 'Water' instead of 'Ice' shards. That would make more sense.

The 'classic' elements are Fire, Water, Earth, Air. Also, spells like 'Flood' (and maybe later Tsunami?) requiring an Ice shard is strange.

One of the requirements for v1.0 available spells is that the AI has to be able to use them.

It's really cool (and easy) to come up with really cool sounding spells. It's not even hard to program them in for the player.  But getting the AI to use them effectively (or at all) is another case.

Post release when I have a lot more time to play with the AI, I can look at more sophisticated spells.

Agreed 100%. A lot of users in this thread have posted excellent spell ideas that add depth to the game. If you're short of spell ideas, I remember Raven X said he has thousands of spell ideas stored up so maybe hit him up.

Ideas aren't the problem. Getting the AI to use them is.