Basically, the victory points are like life from magic (even if they are called Influence), and distract from what are the most interesting difference: cities. The cities give Arcmage a whole new level of strategy. Sure, it gives players more of an incentive to put units into the army, but I think the armies being the only places that units can attack from and defend all the cities is enough of a reason for most players to want units there. This would also allow the losing player more chances to recover, because once they are down to a single city they can put all of their units into there and defend.
Another problem is that the cities die too quickly. It isn't hard for a player to get creatures that have 6+ power. This makes the game almost too short - I've never managed to use cards that bring units back from the dead, because at the point that is happening, the other player is already attacking with enough power to destroy my cities in a single hit.
I think cities should have more defense points because of that. This would allow the game to go on longer and give players the chance to use the cool advantages the cities give them. The cool factor of cards and their abilities shouldn't be underestimated.
Players should also want to have their cities have at least one or two units. When playing against uneasy alliance, my opponent usually keeps just one creature in the Second Son's Army Camp to provide the +2/+2 buff and sends the rest out to smash my cities (he doesn't target VP because he thinks the cities are more fun). I think that he should want to spend a little more time building an army and using city advantages.
EDIT: I think that direct damage (deadly shock, elvish ambush, or skeleton archer) should primarily target creatures in the army or enemy creatures in your own cities (like Shadow in the Dark). This would make players spend a few more turns getting bigger creatures out before sending out creatures to take down their opponent. Shadow in the Dark is fine (if these changes are made) because he is easier to negate. There are currently no counter spells, and I don't think there should be (most people don't think they are fun to play against).
- Remove VP/Influence as a game mechanic in ARC, and give losing players a better chance of turning the tide
- Increase city defense points so that one hit from a unit will not kill them
- Give players more incentive to keep their civilians in cities
- Make it harder to target units in cities