Awesome,
Ok so one vassal hates me because of 'wrong government type' what is that?
That's a malus you get with all vassals of Lord Mayor or Prince-Bishop type. They just don't like you very much, you feudal person you. It's a tradeoff for how they're generally easier to manage.
Quick question - is it possible to mod titles(e.g. Emperor titles) so that cities are compatible holdings for them?
Haven't tried this, and the question is a bit unclear, but if you mean "can cities be modded to be compatible for feudal lords" then the answer is a tentative yes (I know I've seen this in the files, but haven't played around with them), if on the other hand you mean "can the emperor tier for feudals be compatible with cities" then I'm almost certain that's a no. I've seen nothing that hints about the possibility of this.