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1) usurpations being (un)noticed or not:
There would be a big difference IMHO between the barony and country and higher usurpations. In case of baronies (the by far most often usurpations)
- if a player is the supreme ruler, he eould be notified just like he now is about a character inheriting a title. Something what happens, but often comes unnoticed. The message would be 'the governor of province X, Bardas Laskaris has turned barony Y in a province Z into his private property.'
You can ignore it as you do in case of inheritances or babies born, or you can go to the character...and on diplomatic screen you eill have a new option: 'warn about usurpation'.
This will trigger negotiation event chain in which you can decide to
1) send a warning and demand a favour
2) pretend this to be unnoticed and get a "silent favour" or "anti-favour" which can later be used for blackmailing the character.
If you send the warning, there are several possible outcomes
- you send a warning but let the usurper keep the holding but get a favour
- the warning includes a threat that in case of any further usurpations further action will be taken, but still let him keep the usurped land
- threaten for further action if he won't grant the usurpation to you => this may trigger even more fun, since he can complain to the supreme ruler etc.
- demand it to be returned to previous owner
- take it back by force and then do whatever you find apropriate => another possible chain of fun events.
At many of these points you each of parties interested can take some position, appeal to the supreme ruler or ignore it, the ruler has choices who to back, if the justice or his friends or internal allies. This is exactly where usurpations open a wide range of steps, some of them leading to military action, some to imprisonment, some to getting/giving favours, blackmailing.

Of course these usurpations were not meant as "holding A was usurped, that's it and you can't do anything about it". It's rather the oposite. If you imagine that you would usualy have at least 3 parties in the issue (the usurper, the usurped, and a central authority), sometimes 4 (if central authority doesn't act fairly, the usurped can appeal to another instance of central authority) each of them being part of some bureaucratic family, either local or central, I can see potential for some fun actions, don't you too?

Various options as to how to respond makes sense, as does appeals to various higher authorities. However, even if the notification rather small and only baronies are targeted, a player that keeps track of what their vassals are up to already would still notice them and probably deal with the matter (in some way) rather quickly, so I don't think you can hide that something is going on.

Of course it will have restrictions and will be only possible if the realm's laws allow it. Also there should be some limitations to the AI, so for instance the AI local governors won't do this kind of usurpations when the empire is at peace, the emperor and vizier/chancellor/steward is highly skilled etc.
Also going after baronies does make sence since in bureaucratic system the incomes of various offices and tax revenues from landed property should be little different than how they work in feudal governments as touched by @SeekTruthFromFx in his great inptuts to which I still haven't managed to propperly reply... Note that the tax revenues should be little higher in bureaucratic system, while military levies would be largely reduced, since both the bureaucrats and the empire would rather rely on standing armies and mercenaries (to be evaluated later)
Obviously all county and barony usurpations should only happen in places which are under domination of certain family, which is IMHO a sensible and sensefull limitation.
Furthemore these usurpations should not be happening immediately after appointment in the office. It should work similarily to how I suggested the ghulams to work - after being appointed to some office the bureaucrat may be asking for more or better revenues and if he doesn't get them, he might take what he thinks he deserves. It might create some sort of bordergore, but...
- The families interests should be tied around some area. Thus if a Laskaris family has usurped baronies in Cappadoccia and the province/duchy is then granted to Komnenos family, it might lead to rivalry between the two families in which the emperor/central power can stay as the supreme authority and be either the just ruler, or the one who sides with his friends/allies.

- Laws limiting what can be usurped and things like that would be good, though I'd ideally want it to be a fully moddable decision rather than a hardcoded decision because various things about it might be worth tweaking.

- Going after baronies makes some sense, but someone becoming a baron or getting an extra barony isn't really going to make them more powerful (and is rather extreme to go to war for in the first place), so going after counties might be better (unless they already are the hereditary rulers of the county, in which case the barony basically is theirs to do as they see fit with), and with CK2 barons basically sitting around and doing nothing I think that it would be better to have these usurpations (whether by war or other means) be between rulers that actually are doing things.

- Lower levies and higher taxes sounds fine, though see my comment on the standing armies below.

- Vassals (whether hereditary or not) wanting rewards for their "faithful" service would be nice, and them trying to use various means to get them even if denied can work, but even though it might be somewhat accurate (at least in some places) for them to use force and no excuse, I think that it would be better for them to actually try to pretend that they aren't going against their liege and declaring unjust wars, because if they have an excuse of some kind then the emperor can't go against them without an excuse of his own without being perceived as a tyrant, which should be desirable by vassals as that makes it harder to reduce their power.

- Having interests in certain regions (e.g. de jure kingdoms; though of course those differ in size and might be too restrictive at times) makes sense, as does rivalries arising for that and the emperor being able to try to play the families against one another.

I was only following a historical examples in the islamic world (see for instance the history of Chavli Saqao). Sorry if I was unclear again. This kind of appointments/sponsored wars would of course be an emergency instrument for emperors who don't have enough power to do the revocation by themselves. The final status of the land after a victory of either side, however, is of course up to discussion. We must always take into consideration, that the system is plastic and multi-layered and it should be somehow attractive for all sides interested. If an emperor asks somebody for a favour, he should offer an option which would be win-win, otherwise the appointee might decline to go into such war.

Some kind of deal sweetener might be needed, yes, but I don't think that having the choice between vassal A keeping the title as a hereditary title and vassal B taking the title and making it hereditary should be the only option. Favours, money, Influence, and various other things would also make sense to give as a reward, and if the liege is fairly weak (which probably would be the case if he can't do it on his own) his vassal should be able to haggle for a better reward (e.g. "Yeah, I could make him return his duchy to the crown for you, but in that case I'd like my exarchate to be made into a regular kingdom...") and outright refuse without anything but an opinion penalty from their liege.

To say a bit more about the armies:
In the bureaucratic system, the regular levies we know from feudal systems should be very limited and not very usefull for any power-based strategies. You would always need to use some sort of mercenaries, adventurers etc. in order to win a war, be it at any level of bureaucratic pyramid. Those who can afford, concentrate and effectively use these armies and resources are the ones who gain influence. That is where the bureaucratic gameplay should differ from feudal..

Reducing levy size a bit makes sense, but unless there's a major rework of the AI war logic it can't be reduced too much as if the bureaucratic empire is weaker than its neighbours on paper it won't declare war to expand even if it has the money to hire more than enough mercs, and any neighbours that thínk that they are stronger due to not counting the merc capability might declare foolish wars against the empire.
 
I have a little thing to add to the discussion.

The aristocracy of both China and Eastern Rome derived their power from their land estates. Or at least, land estates was how they came to be prominent families in the first place.

Thankfully, the game already simulates land estates smaller than entire administrative districts! They're called "Castles."

The game could implement County-level viceroyalties if it just made it possible to play as Baron-level figures. In the case of Eastern Rome, the Baron-level figures would be unlanded aristocrats.

Of course, we would want to add in more mechanics than just that, but I think that that is actually a better system than if Paradox built one from the ground up, like Elvain is suggesting.
 
I thought "castles" were to simulate castles, military bases for recruiting and defense, aristocratic land-based would require a new mechanic

Well, probably originally, but the game uses Castles pretty much anywhere you to represent non-tribal, rural districts. It wouldn't be that difficult, either, to just have the Bureaucratic government type rename Castles to "Estates" or "Manors" or whatever is appropriate.

Maybe, though, there should be some type of fourth rural, non-militarized holding. Low taxes like a Barony, but also low military capabilities like a City.
 
Having playable barons instead of just a few specific characters holding offmap palaces is a bit problematic:

- People wouldn't be satisfied with just the ERE and a few other (mostly non-European) realms getting playable barons, so only having them for bureaucratic realms would likely not be an option unless you want complaints like "PDS are Byz fanboys!"/"Paradox hates Europe!"/"[Historical baron] was an important figure in [realm] and thus he should be playable!"/etc. to spring up all the time.

- Non-passive barons means a lot more calculations need to be run, even if you disable e.g. law stuff (because barons wouldn't have vassals to set obligations on/prevent inheritance for/etc.) and many councillor jobs. Barons would need to try to marry, would perhaps need to wage war (at least the player would likely need to be able to do that, and I personally dislike giving the player advantages over the AI when it can be avoided), would perhaps have decisions to take, and would receive a lot more events than they currently do due to being playable (and there are more baronies than counties by far).

- A lot of events and other things likely wouldn't make much sense for barons. For example, a baron has no vassals, so anything referring to a vassal (whether a real character or just "prominent lords in the realm") would not work for them, and a baron sending his councillors to collect extra taxes in a province, attempting to build another holding, or the like is asking for trouble with his liege.

- A baron is all but powerless if their liege decides to do something they don't like. Sure, that is also the case for any other weak vassal vs. their liege, but since barons can't join factions (at least not at present) and the AI's approach to them seems to be "Don't bother" when it comes to e.g. demanding conversion instead of revoking stuff you'd easily end up powerless and quite possibly lose the game because your AI liege randomly decides to do something.

- While some existing events/decisions might be possible to open up for barons and more could be added, the fact that a baron would be rather poor and weak (and thus basically unable to wage war) and likely have less to do than even a count would likely lead to rather boring gameplay, and even your marriage/inheritance prospects would likely be rather small.

- While I certainly wouldn't mind a rework of Seduction/Intrigue (and perhaps a few other foci) to make them more logical (in fact, I'd really like some more work being done there as the current vanilla system is easily abusable, not very logical, and "Just turn it off" is not a fun option as I'd want the AI to use those foci in an intelligent manner and to respond to being targeted in an intelligent manner rather than not using them at all), without such a rework and without disabling those foci for barons (which might be unpopular) you'd probably end up with random barons abducting/seducing people for no reason (and having random counts do that is already an issue), which wouldn't be particularly good for the game.

- Barons would need a lot more courtiers if they were playable. You'd at least need councillors (though some might be less important for barons), would need a spouse, would need children, would end up with siblings/cousins after a few generations, would perhaps have a few random characters from events hanging around, would perhaps have concubines if their religion allows that, and so on. Every additional character costs a bit of performance due to various events possibly targeting them and them perhaps deciding to plot and do other things, and all together the cost would likely be rather high.