Caladria was always a generic abstracted europe anyways... And a huge work in progress. When the game started it was very limited and only started to expand with its success. Even then the devs were focused on engine, feature and code improvements, not story, which they left to modders to flesh out content. Can't blame the devs since they started as two people and were still very small for a long time even when the game caught on over the years and held up well before warband was such a huge hit.
The kingdoms all represent major european military styles. The two first factions were swadians being high medieval central-east catholic european in style vaegers were more turkish/byzantine, to represent the conflict of south-eastern europe between Austria and Eastern Anatolia, and all the kingdoms in between. added after were Khergits, generic steppe/scythian/caucasian + nords, early medieval viking obviously. Then later they added rhodok who are kind of an italian/swiss/flemish late medieval infantry style, and the sarrinid who are arab style.
I kind of like that abstraction but as TW said, all the popular historical mods seem to point that going with actual real world geography and kingdoms would not be a bad move and they need to add twists like that to help distinguish between M&B1 and M&B2.
M&B2 is definitely needed tho, M&B1 is a fantastic game, an all-time classic revolutionary game, but is showing its age and the limitations of its small time garage start. Game could definitely use some better dynamic RPG & political content generation built into the engine from the beginning. Modders have done wonders scripting stuff in but the engine has so many limitations.
Also the combat mechanics could be further refined, they can be a bit clumsy and have weird animations and hitboxes. This is especially exposed in multiplayer where players have figured out some really ridiculous moves and other physics tricks. I don't really mind this but when a game is dominated by special tricks it starts to make it too hardcore, and ultimately too hard for newcomers to get into which limits long term appeal and growth. For multiplayer they also need to look at what the c-rpg modders did with the clan warfare campaign map, M&B2 definitely needs that kind of multiplayer economic and political layer, and these talented modders have shown TW the way it can be done.
Finally I hope TW keeps M&B2 as open and moddable as M&B1, not pulling an EA. Modders propped them up in the beta era when they had little time to develop content themselves (they even hired modders onto the team, essentially to port over their own content which was far more advanced than vanilla), and pushed the game's engine/features to the limit, even in the post-warband era doing stuff like adding a clan map conquest campaign to basic warband multiplayer. I have faith they won't shut modders out tho if Paradox is publishing them.