I think making it wraparound for the water nations is best and simplest solution. It might not look so tidy on the map, but as long as it plays OK, who cares?
And I would rather have more than fewer VPs necessary. As Psycho said, there'll be no gem generators. And if one nation is truly on a roll, one or two extra caps will not be hard to attain (note how Midgard rolled up Man and Utgard's capitals in quick succession). But in a no-diplomacy game, I think it takes players extra time to disengage from whatever local action they are involved in, in order to deal with the leader (at the end of YARG 1, I was fighting Midgard alone until the very last turn). That's my opinion, at least.
BTW, I'm going out of town Mon-Wed. What's the time frame on starting this game likely to be? I'd hate to delay things right at the start, but I might need an extra day or two to design a pretender. But I promise, after this trip, I'll have no more fun of any kind until summer at least
