I have to say this sounds as an awesome idea.
Truth to be told, I kinda missed the old fortress and its upgrades, and was pleasantly surprised to see it wasn't lost. Yet, your point is valid and makes sense. It is kind of unimpressive for a level 10 spell of Sauron himself. True, gives one additional fort (adding to the castle, Minas Morgul and Dol Guldur, which may be kinda too much) and has unlimited Werewolves, which is awesome, but...this is still Sauron we're talking about.
For Mordor to become actually fortified would be awesome, after all Barad-dur itself was under siege once, and Mordor itself is completely fortified and invasion-proof thatns to its mountain ranges and the Black Gate. One doesn't simply walk into Mordor in fact. It wouldn't really break Edain's theme of the aggressiveness of the evil factions, since we all know it takes time for Sauron to get to level 10. This of course gives us all the more of a reason to try and level him up and obtain the Ring and/or Gorthaur.
Plus, it would be great to have the big-ass Lava Moat! (perhaps though the same could be done for Imladris's Crystal Moat) Yet, perhaps both garrisoned walls AND Lava Moat is kida too much. I suppose the moat would prevent rams from attacking, even if Catapults should have no problem in that, and also prevent Goblins from scaling the walls. PErhaps just the moat around the castle would be better. Don't know about the storm attacking though.
In the end, I'd say either garrisonable walls and moat around the castle, or ungarrisonable walls and moat around said walls.
The vampires would be nice, though maybe too similar to MM's, and I don't know about Wizards, I'm more inclined to think said 'Wizard' was Sauron himself, but I don't know really.
If I may, I would propose an alternative: What if this power took the place of ''Power from the Past Ages'' in the spellbook? I know it sounds weird, but just read this out:
Sauron himself will return to his old self, given time and, of course, levels. This would be an ability he could get.
Tol-in-Gaurhoth would offer an alternative to Grond: do you play more offensively going to crush your opponents with the Hammer of the Underworld, or play on the defensive and fortify your castle with ancient magic and solid walls? Sauron was not above playing defensively, as we saw during the siege of Barad-dur.
This would make the faction even more unique than it already is. I'll say what I would change about Sauron in a different post.
In the ent, a great idea NetoD20, it really does sound awesome!