Oh please no. We're now talking about not creating a historical simulation, or even a playable wargame, just a fish-shooting match that one player wins all of the time. You're going to end up with a situation where the German production is so high by the end of 1941 that they will out-produce the Soviets throughout the war.
Show me some historical basis to prove that the Axis were able to recruit large numbers of troops from captured Soviet cities (remember that "manpower" is also a factory type), or put significant amounts of Soviet industry to use in producing German armaments for the front line. How many Panthers were produced in Kiev?
Nobody is talking about recruiting troops, but about putting workers into factories.
As for historical simulation, I understand your concerns... but the trouble is that historically the SU was badly commanded not only tactically but also strategically for quite some time and won nevertheless. On the other hand, German strategic command was at least decent.
This is reflected in the game - once can commanded SU as you like, you will win, unless you made horrible mistakes (or in other words the German commander is really much better than you). And not letting the SU player to do what he/she wants is not fun (i.e. no, you cannot move those units which are going to be surrounded because Stalin told no).
I believe for a game to be fun, there must be more or less equal chance for either side to win. As it is now, it is not (the few true Germans wins are mostly because Russian quit a bit too easily). I believe that the industry change would make the game more fun, and give some reason for the Germans to 'fight the war' and SU to defend and fight for towns. At the moment, even a relatively inexperienced player like me can bounce back pretty well when playing as a SU.
Additionally see, that what I propose means that you need to keep the city for some half a year to benefit from some of the production. This is a long time and gives chance for SU to attack; Also, most of the production is concentrated in the cities which are within reach of good 41 blizzard offensive - as such Germans would need to fight much harder.
As for the historical accuracy, well. Do you think that a conserves produced in Minsk could not be sold in Germany at any point? Do you think that Soviet vehicles were not used to transport any goods in Russia by the Germans, even when contracted by a Russian company? All those relieves strain on the German production - so it can be counted as production towards Germany.
This is also why not all the production cannot be evacuated (see the quote beneath too)... Please check that I did not suggest that Tigers should be coming out of Kharkov... just the generics... and not that much, just to balance the game a bit more. As playing a balanced game is fun, whereas playing unbalanced game is not that much fun.
Also, a quote from Time magazine does show that running the factories by the Germans were taken as a possibility:
http://www.time.com/time/magazine/article/0,9171,773369,00.html [Monday, Aug 03 1942]
'Air Power. Not planes in operation but plane-production figures win future battles. Now British and German plane production are believed about equal, U.S. production 50% higher than Germany's, Russia's somewhat lower. If the Germans could get captured Russian aircraft factories into operation, the scales would tip ominously closer to parity. Total destruction of such plants so that they will not fall into enemy hands is a tough job, for which the Russians have little time as they fall back.'
As such, not as unhistorical as you suggest, that is my opinion. Giving more strategic options - I like it. And, if done correctly, balancing the game, which, I think, is important...
Thanks for your input!