Sega has released Update 1.3 for Medieval II: Total War today.
Medieval II: Total War v1.3 contains the following changes:
Core Medieval II settlement data updated to function correctly with Medieval II: Kingdoms.
Fixes some instances of floating settlements in Medieval II: TW and Medieval II: Kingdoms.
Updates version number to 1.3
Download the update, unzip it to your desktop and then manually install the patch via the setup.exe in the Update 3 folder in this directory.