I was thinking one big city too! This is all so awesome, well done
See, I love all these ideas, but I would go even more hardcore.
In the dusty memories of time, in the great before, powerful wizards made this world strong and prosperous. It was governed by a council of wise and benevolent leaders, a magocracy. But a rot spread in, a deep corruption as the greatest of them all, Lamastu, began to power her greatest magicks with necromancy. The followers of the many gods sensed that the balance was off, that the divine light that also suffused the world was dimming, and began to act against Lamastu. Sensing this threat to her power, she unleashed the colorless fire of the negative material plane ... with disastrous consequences. She could not control it, and it expanded and engulfed her world.
The clerics that confronted her died on the spot ... their divine sparks burnt from the their bodies. But as they went, so too did all believers who had a true spark of the divine in them. And crops withered and died, and forests melted away. And as the Gods looked down upon this world and what had been done to it, they cursed it and turned their backs, never to return. As the Gods departed, the believers who were struck down rose up, not to an exalted afterlife, but as imitations of themselves, as the undead, with nothing they wanted other than the death of life, and revenge against the magicks that caused their cursed condition.
No one knows if this is true, or just myth. There are no gods, or, if there are, they do not answer any prayers. Outside of the few cities there is little vegetation, little green remaining, and the cities themselves rely on subterranean fungus farms and crude hydroponics to feed their masses ... poorly. No one knows how many of the unliving there are, out beyond the city walls, but they are countless. What is known is that the unliving are attracted to magicks of all kinds, and to practice magick within the city walls is to be sentenced to banishment, or death ... but there is no difference.
Worse is that the world seems cursed. All who die rise afterwards as the unliving. Anyone who is sick or unhealthy is viewed with suspicion, and the dead are immediately sent over the city walls ... if they wait for you to finish dying. Since there is no magick, the people have turned to other methods to defend themselves. Warrior monks that patrol the streets. Gunslingers. Artillerists of all kinds. There are even people who have entire suits that make them stronger and faster.
It's a desperate and bitter world. Everyone sees their end, knowing that death doesn't bring respite, but the desert.