Having continued my play testing I have amended my original post a bit. I wondering the prospect of emergent factions but this could require some scripting. This is all very speculative but the prospect of factions like Austria becoming their own outside the HRE would be fun down the line. Or Russia becoming an entity and so on.

Maybe the HRE could have more rebel factions to represent it's inner borders?

Should you wish to remove Sicily and Jerusalem representing the knightly orders you could just make these rebels similar to Constantinople in the traditional late game period (latin empire rebels). Western factions should still be able to recruit orders through those special buildings anyway.

How progressed are settlements in this setting? I feel having the factions mostly advanced on their tiers would make for a fun late game challenge.