Different schools of thought have gone back and forth. Ultimately, what it boils down to is:
Many tiny vassals
Pro:
-Individually, they're too weak to revolt
-Lots of individual direct vassals to provide tax and levies
Con:
-Tech growth is significantly greater at Duke level and above
-Paying off 100 vassals revolting in unison is problematic
-Organizing scattered and disorganized levies is monotonous and exhausting
Fewer large vassals
Pro:
-Less vassals to keep happy
-Levies are summoned in more centralized locations
-Tech growth can into stronk
Con:
-One unhappy vassal can hold a Lot of power
-Fewer levies and taxes available to you
I personally keep King-level vassals when I get big, and vassal Dukes within my own kingdoms. I do find having to pay off fewer kings more economical than paying off tons of dukes (and if you pay them off the moment they inherit the crown, even wealthy rulers will gladly take 20), and upgrading the realm makes up for the tax loss well enough. As a bonus, bigger vassals are sometimes big enough to handle revolts all on their own.