I have to disagree with you. I think it's actually canon that those eight slum sectors were once the original eight towns and that everyone has forgotten their names.
I mean, i agree with you about the themes which is why I like that reading, but as far as I know the canon is ambiguous.
Of course, if there actually were
eight whole towns in the space occupied by Midgar that was population density like we see nowhere else on the Planet (wow that farmland must have been amazing before Shinra drained it?) and suggests Midgar is even bigger than it looks.
...it's also possible Midgar was built over a (probably smaller, which would sort with the parts of the slums we see all being toward the middle) preexisting
city, with named wards in the style of Tokyo, which had their own identities. Also in the style of Tokyo. Which would make the implication of that obliteration particularly poignant for its original intended audience; the 'fallout of naked corporate greed' motif here is after all partly in response to the zeitgeist of the Japanese economic downturn in the late 90s.
I know there's often confusion in translating from Japanese where the original writer meant the story to be set in a fictional ward of Tokyo, but the convention of translating -ku as 'city' leads many Americans to naturally assume it's set in a fictional fully independent city.