I've noticed that there are two main approaches to urban-based fantasy RPGs. One approach is to take the typical D&D style fantasy game and sets it in an urban setting. You get the medieval tech levels, magic, elves, dwarves, etc etc.
The second approach is to take a modern (or near-modern) urban setting, like the Dresden RPG, that is based on the real world. The magic or fantastical elements, that represents true reality, are hidden from the majority of the populace. To be sure, there are many other approaches (clockwork, steampunk, horror, pulp, etc), but I do think that there exists two sets of tropes that are commonly used for urban fantasy--the medieval D&D approach and the modern hidden reality approach.
My intention is to take the modern approach--with magic and the fantastic mostly hidden from plain sight--and use it in a medieval urban setting. It means that +1 swords will not be available at the corner store, unicorns will not be for sale at the city's livestock auction (sorry, Tim), and humans will be the only race available as player characters. I think this sort of setting lends itself to systems like GURPS and FATE. I could see using a very stripped down D&D retro-clone, like Swords & Wizardry (maybe a slightly tweaked Crypts & Things would work well, with the mages having to operate in secret).
Conceptually, I am starting with a real-world city (Constantinople), creating a realistic fictional city based on it (so I don't have the cloud of historical accuracy lingering over my head), and then infusing it with magic and the fantastic (much like Jim Butcher does with the Dresden Files). I think it could create a very different feel than starting with a standard fantasy setting and creating a city for it.
I would be interested to hear what you think.