Yeah, its for stuff like Crusades, where you'll suddenly take 30+ holdings, most of them the wrong type, and nobody likes sorting through a dozen cities creating a dozen mayors.
It is better to just hand off kingdom/duchies/counties to skilled administrators with the "include all titles" box, and let them sort it out. The bonus is that all the new Lords will appreciate your vassal for the vassal technically being the one to promote them, increasing tax revenues and levy counts. As long as your vassal remains loyal to you, this is good. And your vassal should for at least one generation, because you gave them several dozen counties and all of their baronies.
Is it worth letting things progress into a Scot/Byzantine nation or should I change my succession laws to prevent that?
NEVER turn down free empire
There is one good reason to turn down free empire: Forming an Empire takes away your ability to merge duchies into one Kingdom.
I am quite tempted to try a monoKingdom run. Can you imagine the prepared invasion cbs! The Great Holy War cbs! You could expel the world's nobles in one war!
And on that same vein of utterly broken, I took a brief interlude from the Murrican Miroslavs to try and see if I could find a new way to convert my old 700 year long game into an EUIV game. Tried manually deleting dead characters and the chronicle, reducing the save to 1/4 of its size, but I deleted something important and the save just crashed. However, I am nothing if not persistent - and decided that I would also settle with a crude approximation on a smaller save, so I set out to do in 14 years what had taken over 700 to achieve. Cheating was done in abundance, and if I were living in that world I would be terrified beyond imagine of the inevitability of Miroslaving. They conquered the entire world in the span of a few days, but there was only one Miroslav at the time - so they were handed off to Nobles of the cultures that attained dominance at the end of the 700 year run. The Roman Empire was recreated, the Empire of Germania was replaced by the Holy Roman Empire and in general all the borders of the Empires were much cleaner this time around (though sadly, this did remove the cool oddities like the Teutonic Knights of Transylvania, the Merchant Republic of the Black Sea, the old Saxons of Sussex, the Zoroastrians of Fergana Valley and the mess that was Hispanian culture). Things only went off the deep end when the Miroslavs began breeding. They sexually matured within days, like plague rats (coincidentally, arriving during the black plague). Whilst all the nobles died of the black death the Miroslavs were frolicking through the bloodlines of everyone from the Plantaganets to the Habspurgs and the Mongols. They were even possessed of certain traits that made it impossible to do anything other than love Miroslavs, and very quickly all the Empires shot up to absolute authority as the world demanded the autocratic rule of their beloved Miroslavs, who had at this point great-great-great grandfathers at the age of 27.
Probably the best fun I've had with balls to the wall cheating, and at one point before making the traits that forced total happiness upon the realms I settled with making all the important vassals homosexual crusaders just to get the opinion modifiers on attraction to gregarious/strong/fair/genius/quick uberslav. Now I've just got to do a shit ton of editing on the EU converted map to clear up the clusterfuck conversion does to the African/Asian borders and it should be good to go.