Well, in my view having Bavarian separate from badenian etc is a bit too much. We should remember that in this period German rulers often inherited domains and posessions on pretty much the other side of the HRE than their original domain, but didnt seem to have any cultural problems governing it (and certainly not any problems that would require a tax penalty in-game).
Example" From 1614, Brandenburg owned the county of Mark (modern Dortmund) and Cleves and they didn't have any national or cultural struggles there. The main issue in the HRE was religion, the only "cultural aliens" were the Czech and Dutch lands.
So while I may accept south german/north german cultural split, I do not see any further german particularism historically-plausible in this era. If we assign individual regions in the HRE their own cultures, then as a result we would have to divide polish culture into "Greater Polish", "Lesser Polish" and "Masovian". We would ahve to divide English into "South English" and "Geordie". French would need to be divided to Provencean, Occitan, Aquitan ec.
All in all, I'd say this would not make too much sense. EU2 cultures should be used in cases of significant cultural differences - different traditions, different language etc. So while I may support dividing Celtic into Irish, Scottish, Welsh, Cornish and Breton (different traditions, difference in language, no common political tradition), Or Danish/Norwegian/Swedish (different languages, separate political traditions) I wouldn't go as far as to divide Italian, French, German or Polish culture into subdivisions.