I'm fairly certain that firefly's final point is wrong - a so-called village could not apply to be a town (though he's correct that a town can apply to be a city). The terms hamlet, village, township and town are very flexible, and estateagent-ese certainly comes into it. For example, a number of pleasant, though still very urban, enclaves within London like to be thought of as villages. It used to be said that a village (presumably as distinct from a hamlet) should have a church, public house and school, but many country pubs and schools have closed, though the locations concerned still call themselves villages.