I just started playing - my first game I tried to be self-sufficient and produced my own guns but that was a bad idea since guns are cheaper than tools, which are cheaper than ore. I could just buy them.
My second game I tried to avoid having soldiers but my mother country declared war on several countries. I got beat back to my last two towns but I was able to import lots of guns and settlers and eventually won back my land by training soldiers and buying arms from Europe... then a bug forced me to quit (sometimes dialog comes up and I can't dismiss it or save the game) before I could save.
In the third game I decided to interact with Indians a lot. I got my ship to start importing trade goods to the new world as possible. My villages only farm and make bells, but if there's naturally occurring resources I assign a worker to make stuff out of it to sell to Indians. I grew to have half a dozen frigates going back and forth from Europe, buy trade goods, then return and sell to Indians. I bought lots of guns and armed all of my towns. My mother country eventually declared war to everyone. They also offered me to buy a bunch of dragoons, artillery and troops for only 2000 gold every once in a while. I used these troops to demolish enemy colonies and by the time I had 3 quarters of all colonies in my grasp I had 10000+ gold and my forces were two thirds the size of the royal expeditionary force. The only buildings I've made are docks. =D Then I zoomed out and FreeCol screwed up again. Long live the King!
Is this the way it's meant to be played? :)