When somebody quits, their non-city troops should be abandoned. Otherwise there is too much volatility in the game: say I am about to capture somebody's king and they quit instead: now I don't get their land and troops, rather I have to fight against them. Enough of these types of swings, and the game is swung towards the lucky ones in a volatile way.
Yeah, I think leavers should retain their capital and still be capturable. Plenty of people leave right before they lose; the game seems to give you a few grace turns but it's often not enough.