okay, before some crazy fan boys jump in, let me answer ur questions neutrally.
My vote wud be for city.
1) initial cost isnt a problem, so no problem.
2) take my word on this one, NOTHING, absolutely NOTHING made locally can compete with the fuel economy of a honda city 03-11. The mileage which u posted is when the car is brand new, at that time, yes , mileage is low. Thats because of the running period of a car, for any car. after the first 5000kms.my 06 idsi used to give 11km/ltr before 5000kms mark and after that, slowly rose up to 15km/ltr... so dont worry, i ve seen city doing 17km/ltr locally if driven with patience.
3) i dont know about swift suspension, but yes, city suspension is a bit on the harder side but u ll absolutely love it... specially on gud roads.soft suspension produces bumpy ride on even average roads.while city's cabin stays stable and comfortable. havent driven swift yet so cant be sure but when i pressed it down at a showroom, the suspension felt as hard as city or civic.but dont worry, ride of city is absolutely smooth and comforable.and its stable too.
4) cabin space is certainly better in city, as its a bigger segment car. even if u ignore the huuuuggeee trunk, the leg room etc is great. though u wont like the head room at the back if u are near 6ft.dont know if its the same in swift.
5) nothing solid can be said about resale value of a swift, but its certainly at stake since not many cars have been sold and there arent many potential swift buyers in the market. on the other hand, a well kept honda can be sold in hours. ppl usually ask me on road n places if i want to sell, and a friend has new city, he says the same. so city takes the lead here too...
now its your move, the best way to decide now is to take both for a ride, drive atleast 20kms on different type of roads and u ll know.