The action would take place after the initial colonization has been done. The first travellers found an existing largish city, ready to inhabit.
Of course, things similar to this took place in parts the New World that smallpox reached before Europeans did. You might want to think about why the city was suddenly abandoned.
All of the houses etc look wierd, as if from some unknown culture. Still, the place is abandonded, and looks like it has been for quite a long time.
This seems to conflict a little with "ready to inhabit" but also was a common situation in the New World, Teoteohuacan being one of the best examples. The resolution of abandoned long ago vs. ready to inhabit is going to be, to a large extent, determined by the ecosystem of the region. If it's jungle, the gap between a city being abandoned and ready to inhabit is pretty small; in a mixed woodlands, on the other time, you have more flexibility in terms of time.
Meanwhile, there would be a political struggle going in both the New World and the old lands, with lots of nobles and merchants trying to gain more influence over the new-found commodities. The King might not have appointed a Duke yet for the new city, preferring the increased rate of exploration due to the competition going on.
This does not sound like the Renaissance. Nor does it sound like how government functions; frontier regions are virtually ungovernable at the best of times. Even with clear authority, a large garrison of imperial troops and special laws and jurisdiction for the region, it is going to be chaos. I think the kind of competition/freedom you are talking about will take place no matter what; if the crown seems uncommitted to providing a modicum of authority, merchants probably won't be willing to risk it. So I would recommend you re-thinking this. Early modern government jurisdiction is pretty inherently precarious anyway, even within core territories with clear authority systems.
Every competitor wants to gain prestige by bringing in more items/paintings/writings/etc. In short, there would be exploration, coupled with some diplomacy and (dirty) politics.
If formalization of this competition is important to you, you might want to consider going the chartered company route (even if it is a bit of an anachronism -- it starts 150-200 years later) with the crown chartering companies with the right to explore/plunder and some jurisdiction along with it.
[QUOT]As for the renaissance advancement, it's even more based on worldview than on technology. That's what I hope to accomplish by using D20 Modern classes. The life of people is not just determined by their profession (class), but they have an awareness that they can shape themselves.[/QUOTE]
There is a pretty serious anachronism problem here. This is 18th century thinking not 15th century thinking that you are describing. Now, of course, fortune hunters, within a society are always going to be self-made people so I don't think you need to worry that people coming to the New World are going to have this view. But I think you will create real problems if you make this the prevalent view in society.
People don't think of themselves as Fighter, Rogue or Ranger. It's about what you're capable of and what you know (focus to skill-heavy classes, less on class abilities).
This is a good mechanical move that I wholly endorse. However, I would really recommend against you giving your society too modern a view of hierarchy and social order.
I might even include some primitive races for contrast, that would still use D&D classes. Some tribe of Lizardlike creatures, that was 'pacified' some hundred years ago and is now starting to blend into society.
This strikes me as messy. Find ways to represent D20 Modern.
I'm not really sure of religion just yet. There might be a church of two gods, but interest would be waning in times of technological advancement.
Again, this is really anachronistic. This is a development after Newton (ie. another 18th century development). It is beginning to sound to me that you want to run an 18th century style game and not a 15th century style game. The early modern period was about expanding science but the religion/science/magic barriers our culture perceives did not exist. If you were a good astronomer, chances are, you were a good astrologer. Copernicus created his model of the heavens motivated principally by the discovery of the "hermetic texts," an occult tract from the 3rd century AD.
I'd appreciate it if you would clarify what renaissance aspects you really want the game to have.
Tonguez also makes some good points about why a big chunk of the world has no significant sentient inhabitants. It suggests some kind of incredible cataclysm has happened; you might want to put some thought into when and what kind of cataclysm took place.
) The Lizardfolk are natives of the old world and have been in contact with the humans for quite some centuries. Many of them have become civiziled, some even live in human citues. There are also still some wild tribes, who will not yield to the new ways of humankind. (Lots of potential for cultural conflict. 
