It works OK for me in DOSBox 0.72, and doesn't appear sensitive to core/cycles settings, at least as far as being able to raise/lower land. Auto settings in DOSBox give normal core and 3000 cycles, which works fine. I run the game with a batch file that specifies some hardware options on the command line: "populous Vga Adlib".
The cursor changes to a plus sign when you can build, so if you see the plus sign cursor but can't build, that's a mystery. However, if you don't see the plus sign cursor, there are things in the game (not related to DOSBox) that might prevent it from appearing:
1) Game is paused (new games seem to start paused for some reason). Make sure the Zzz icon isn't highlighted.
2) Option has been set to disallow building. Look in "Game Options" in the World icon menu.
3) You're trying to build too far away from your controlled area; one of your towns or people have to be visible in the central view.
4) You don't have enough mana to build. When you start on a map with rough terrain and few people, it takes awhile to get some mana going.
