Gloranor: You need 3 regions per town, so when you get your 6th region and built the village there you should get a new project to upgrade a village, afterwards select the village you want to upgrade (the same way you do when you want to enter it to build there), there should be an option for upgrading it.
I think, it has to do with the level of population you have, too.
I have 8 regions and the upgrade of the second village to town happend, after i upgraded some of the category levels.
It did not ask me to upgrade after getting more and more regions. Only the first upgrade did this.