Been holding off for various raisins, but I think it sounds cool, barring the problem currently in discussion.
I remember hearing that player characters were 'superhuman' in comparison with regular folks, but does the game model regular population's various opinions and stuff? I imagine that if populations could turn on you or something, it might help prevent big, grossly overpowering dominions.
Do they also model stuff like resource consumption? It might help if populations got angry if they don't have enough to eat and whatnot, where they'll rebel if too many resources are diverted elsewhere - 'We grew it, why's it going to some king to grow fat on a thousand miles away' sorta stuff.
Maybe have the people by default a little leery of players, due to them being dangerous and powerful and stuff. If they're a beneficent lord, maybe they'll grow to like the dude, but otherwise the discontent makes it barely tenable to field a few men in the political arena without constant oversight. Maybe also make them more angry the further divided their lord's power is in a realm, and how many steps away from the king they are - if you're a minor baron under a baron under a duke under a lord under a great lord under a king, have them think it's too big to manage, and that the lord would be able to get away with declaring independence - or get mad that he's too much of a wuss to do so. Similarly have them think it's too big and you could get away with it if you're one noble in a thousand, or something. This way, small kingdoms would be pretty efficient, but as a realm grows larger, either in one person's command (their fief) or in player-size, it gets increasingly inefficient and unusable. This would put a soft cap on realm sizes and incentivize splitting off.
If a population is uncontent with a current ruler, perhaps players trying to oust or rebel against him would gain bonuses in the form of revolutionary population and morale penalties to the soldiers or something, to further facilitate a changeable world?
The only problem would be not stagnating at a 'perfect' size ratio, I guess, right? Not wanting to attack other people because you're self-sufficient, and it would be wasteful? I'm less sure about watdo for that... maybe make populations increasingly want stuff at their borders? Sorta a greed thing. Maybe that sets a bad precedent, though, basing all the conflict on dem peasants (counter to the usual historical perspective, which is probably pretty important for immersion) as well as making it feel like it's just not worth bothering trying to play that bit.
Maybe newly conquered territories get newly-conquered maluses, and by recruiting from their populations and drilling your armies and getting into fights, those maluses are slowly lessened? Meanwhile, getting into fights would generate ill-will between different territories, making the populations want to get into more fights with them, or something? Maybe have an increasing malus on those maluses that go up with each battle, in the form of war-weariness, or something...