Only interior towns in my world are not walled...anything close to a border is walled and normally has a garrison of some sort (if it's in a major realm, at least).
I would imagine, depending upon how old the interior settlement is, they would have the remnants of their defensive structures, at least. Likely the forts and garrisons have been converted into other things, recycling didn't start in the 1970s.
I also made my history much more dynamic. Nothing bothered me more than fantasy worlds with "for X thousand years nothing important happened" in their background. Just didn't make sense to me. So in my campaign the baseline time is about 1000 years before the game starts...things are still somewhat new and open so that characters can actually carve out realms for themselves if they want.
The only thing I think they get "right" is the lack of technological growth over such long periods. I think that those people that would be working on such things are instead, doing magic. So, it makes sense that the 1200 year old nation is still in a middle-ages level technological state. (At least somewhat, maybe not that old....)
I too, like the idea that much of the world around them is unknown and unexplored - at least as far as they know starting out. In fact, that was the idea for a revamped Greyhawk campaign I have been working on. The Greyhawk Wars were much bigger and much more destructive, and most nations collapsed, many/most people had to flee their homes in search of safer lands. (A risky endeavor.) Nearly 500 years later, they are from a town that has dealings with about half-a-dozen other settlements and have a decent idea of the lands up to 200 miles away (give or take a few dozen miles). Other than that, only lore and supposition, and much knowledge/lore was lost in the dark years.
