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Development is not going to change from a pure monarch point cost, period. It'd have far too much bleed-over with buildings and would defeat the entire point of letting small countries develop when they can't expand.
What's the problem with OP Scotland who create metropolitan Shetlands? They do exactly that - develop when they can't expand.
I got your point, and I believed it's the case, so I don't said it before. But I saw in DD today that quite logical consequences of that system are counted as something worth fixed.
Implausibility / immersion breaking. It's fine if an imperial free city gets built up to ridiculous levels since that's at least plausible, but Shetland as a sprawling metropolis is something anyone will recognize as patently ridiculous. It's not a huge issue, but it is an issue.