Alright, time to send in some sanity. Even if it is pouring more water than the sky could POSSIBLY hold.
agentstaple does have a good idea, it just needs a bit of smoothing into the main, and to make it more. . . adaptable.
What we have right now, according to the OP, is a village that takes orders from the player, and builds the requested building on the spot that a flag is placed. That I know of, you have not added any information on the upgrades yet. But, if you do, my thought would be a "Sign", something automatically created on the building that displays the name of the building (Which Kinniken had to create because signs in vanilla don't do yet). When you click this sign, the building's GUI comes up. Here you can make changes to the building, including upgrades and hire/fire actions.
AgentStaple's idea can be implemented here. A building, once it is built and the residents move in, can be given materials that match the need for the upgrade (cobblestone and stone for a forge, for instance), and then given a certain amount of time with no action, they will build the next upgrade with the highest cost. It's more about keeping the "Leader" of the village moving about.
I dunno. This may be too unbalanced, but then again, it might work.
Howabout a prison wand that requires 2 stacks of cobblestone and your millitary raid selected villages for their rescources and (optional) villagers, and maybe even (optional) their leader and seizie control of their village.
If that was part of it then you can question villagers for secrets... And also do(Every) Evil Dictator's dream: Enslave the world and have rebels executed... *Evil Laugh Commense*
A better suggestion would be to do what Terraria does.
When you build a base you can set up rooms with certain conditions met that let an NPC move in, and certain NPCs will not move in unless you have met a requirement in the game
I would work it more like this
Condition 1 for NPCs - Your base/town must be fairly safe
The NPC's quarters must be fully enclosed with a door and proper lighting
Condition 2 - The NPC must have comfort objects
The NPC will require a place to sleep, a surface that functions as a table, a chest to keep their goods in. and unless their quarters are inside of another building one window to see the outside world
Condition 3 - Proper Marking of their quarters
The NPC will require a sign on a block adjacent to their door that states the room is theirs, without this sign they will move out.
Condition 3 - Dependent Upon the NPC special conditions will be required for them to move in.
-Villager - The Lifebood of your settlement, they require Conditions 1 and 2 be met, Condition 3 for individual homes containing single individuals or families a Blank Sign will be placed outside and their family name will appear on it. If the Sign is just marked as Villagers then multiple families can move into one room and share a space, the max number of villagers will be determined by the available room. if the area is properly lit and has 10 beds, 10 single chests, and 1 table per family or individual you can have up to 10 villagers
Villagers keep your economy alive by buying and trading amongst themselves, if your village is prospering they will gift you resources. If it is failing they may move out.
-Merchant- Sells general goods such as Food, Tools, and Animals, They require Conditions 1 and 2 be met, their Quarters must be marked by a sign reading "Merchant" they will not share their quarters with other NPCs and require their own private living quarters in their shops (A bed). They will require a crafting table, a double chest, and a furnace. They may occasionally send you out resource gathering so they can make new goods to sell. (this is optional and can be done whenever). They require at least 3 Villagers living in your settlement. When a Merchant is satisfied with you they will start carrying Diamond Tools in limited supply in their shop.
-Alchemist- Sells Dyes, Gunpowder, Water & Lava (for empty buckets), and Glowstone dust. They require Conditions 1 and 2 be met, Their sign must read "Alchemist" a crafting table and a double chest. their own private living quarters in their shop, a Merchant, and 8 Villagers. They may occasionally send you out to collect resources so they can expand their shops inventory. When they are satisfied with you they will start carrying Dyed Wool, TNT, Glow Stone, and potions that do things like make you stronger for a period of time (faster mining), or make you less hungry (hunger bar depletes slower for the next 20 minutes)
-Doctor- Heals you for a price, sells new health related items. They require Conditions 1 and 2 be met, a sign outside their quarters that reads "Doctor" They require a double chest and a crafting table, and their own private living quarters. Once your village reaches 10 villagers The doctor will request you expand his shop into a clinic or build a clinic. A clinic will require room for 1 doctor per every 10 villagers (Special NPCs like Merchants, Alchemists, etc included in this count, other doctors are not counted towards the total and your total NPCs not counting Doctors can not move past 10 until you have 1 doctor per every 10 villagers/merchants/etc.) At this point the doctors will heal you at reduced cost and start selling healing potions that restore some of your hearts when you use it after taking damage regardless of the state of your hunger bar, the sign outside the shop must be changed to read "Clinic" at this point
-Farmer- They will tend your fields and deposit Wheat and Melon Slices for you in the closest double chest to the farm, They require a Farmhouse with one bed per farmer, one single chest per farmer,one crafting table in the farmhouse, and a a sign outside the farmhouse reading "Farm House" Each Farmer can handle a 4x7 area of crops and will work the closest field to the farmhouse with the other Farmers. For each crop they harvest they will take 1 piece of wheat or melon slice for themselves and replant the seeds from where they harvested the crop if they have the available seeds. They will not deposit left over seeds in the farm chest. If the farmers like you they will sell you left over seeds and baked bread.
-Engineer- The Engineer will sell you redstone, redstone devices like levers, torches, repeaters, etc. and minecart tracks and such. They will require One double chest with at least one stack of redstone in it, and one stack of iron, a crafting table, and their own living quarters in their shop. their quarters must be marked with a sign reading "Engineer" They may occasionally send you out to collect resources. Once they like you they will sell you Powered Minecart Tracks, and drop their prices on regular minecart tracks and minecarts. You must have at least 8 Villagers before they will move in.
-Monk- They will act as a source of inspiration to your villagers and other NPCs making them like you faster, they will help the community by volunteering at other jobs. They require their own quarters with a sign that reads "Monk" They must have one bed, one single chest, and 15 Villagers including other NPCs and Doctors in this count. You must also have traveled to the Nether or The Aether (if its ever put in) and survived in either location for at least 20 minutes before a Monk will move in. Once your village grows past 20 villagers the Monk will request you build a Temple that can house multiple Monks, It will require you have been to both the Nether and the Aether, one bed and single chest per monk, and a sign outside their quarters that reads "Temple" when the Monk(s) like you enough they will start making beer and gift it to you on occasion.
These are just my ideas for NPCs and probably a bit too complex for this game. but its a thought.
Wow, that is achually pretty good!
That would solve the way to design yoru own houses, but in return y ou could also keep the wands incase you dont want build more stuff
Also maybe after a while some Monks will request you make a distilery (Maybe it would need some iron blocks, furnaces placed in a specific order) and then they will turn into Beer Makers and produce beer, though there could be a downside like in return for hapiness you will ocasionaly get some drunk villagers doing stupid stuff (E.G the alchemist might blow himself up with TNT)