First off, thanks for the interest, as well as for the many excellent questions. :)
What's magic like, in practical terms?
There is a difference between what the Children of the Ancients used to be able to do to what they have been able to conjure up more recently. At the height of their power, the most powerful magicians could literally shape their environment. Some of the oldest buildings within the city kingdom were not so much built as they were brought into reality by magic. Some control of the elements was also part of their repertoire. Amargith the First was known for being able to control lightning. The magicians were also able to submit wild animals to their will (you can interpret the polar bear in the Amargith the First image as her enchanted guard dog)
As the bloodlines were further diluted with each new generation, their powers have slowly faded as well. Amargith the Third does have some magical powers (which I will not reveal just yet), but her mastery of the arcane arts pales in comparison to what her ancestors were capable of. Suffice to say, her magic is small (in scale and application) compared to what the Assys used to be able to do.
Does Blueport have magical traditions of its own?
No. Blueport is a Viking city that has survived courtesy of their ships, courage and wits. They live off what they catch in the sea and from what crops and supplies they raid. Part of the reason why their relationship with the Assys has been strained is because they frown upon (and are secretly fearful of) their use of magic.
Do people ride bears?
No, but historically the Assys (or rather, those amongst them who could wield magic) have been known to use enchantments to bind bears to their will.
What's the technological era in Alaywin, do they have firearms?
They do not have firearms. Their technological level would be more advanced than the Vikings. They too would wield swords, spears, shields, ... but their materials would be far superior and their weapon thus stronger/sharper/more sturdy.
Is everyone Caucasian?
With very little influx of outsiders, Alaywin has a rather homogeneous population in terms of racial make-up.
The very large majority of their people would have a rather Nordic look. The members of the bloodlines that hold (or held) the magical power have a common trait: their hair is either white or palish blue.
Will the game start in the unnamed capital city of Alaywin, in a far settlement, at a summit meeting between Alaywin and Blueport, in Blueport?
The game will start in Alaywin, shortly after Amargith decided to call in the assistance of the vikings.
How many aristocratic families with magic-wielding heirs are in Alaywin?
There are three arcane bloodlines in Alaywin. Since recorded history, the ruler of Alaywin has always come from one of these three families.
It is tradition for the families to marry their children off to each other, in an effort to keep the bloodlines as pure as possible, though this has only been partially effective in keeping their magical powers intact.
What IS the culture of Alaywin, in comparison to Blueport's presumably Viking-esque society?
The Assys are somewhat isolationist. In that regard, the remote and barren location of their kingdom is no coincidence. They have a rich tradition in science and technology, as well as a devotion to the arts.
Though not purely xenophobic, they are very mistrusting of outsiders, and the few newcomers they welcome in their midst need several generations for them and their offspring to be accepted as true Assys.
As such, Amargiths decision to ask for the Vikings help is a controversial one. Some at the court believe that she is breaking with a tradition that has been upheld for thousands of years, even though her motives (saving her kingdom from ruin) are noble.