Yeah I like it, good work!
I am fully in favour of anything that increases the strategic choices and weighing up of costs the player might have to do.
I dislike the present monarch point system, because so much is based on something that's almost entirely outside of your control - the stats of your leader. You expand headlong when a random dice roll gave you a good leader; you crawl along when it gave you a bad one. This, in my view, is a poor excuse for 'strategy' - going hand in hand with the over-numerous randomised events, but more serious than that.
So moving diplomatic relations outside of the Diplomatic Points sphere works for me. I think a prime candidate for cost is gold. I see lots of people saying that, later in game, they have far too much gold and nothing to spend it on. I could therefore see that gold could be a great way to boost the number of diplomatic relations.
So say '100 relations points' is base, and an alliance costs 25. You're at your 100 limit, and you want another alliance. That could cost, say, 12.5 gold a month in 1444, and 125 gold a month in 1750 - 0.5 to 5.0 gold per point, per month. The mechanism by which the costs scale would need to be considered, but I think it should scale somehow. 12.5 gold a month in 1444 is an appreciable cost, but it's affordable in most cases if the result is worth it. This leads to some careful thinking - do I really
need that alliance? Is this going to dramatically improve my chances, enabling this or that further strategy? Or am I just getting it to soak a bit of AE? Or getting it as a purely time-saving, temporary measure such that I can get Fleet Basing 6 months earlier than with Improve Relations?
I like those sort of cost weighs up. I don't like them so much when they're based on Monarch Points, because so much already is, and because your source MP is mostly out of your control. I also wouldn't like it so much if it drained Prestige or Legitimacy, because again those numbers are not so directly controlled. And in the case of Prestige, it tends to be the case that you either never have much, or you're permanently at 100 cap. True, draining that might resolve the latter case; but it seems to me very hard to balance for different nations at different times in the game. And the main way of getting it back is through yet more warfare - which is far from a finely-grained method of manipulating it.
Gold though works well; there's already too much of it late game, and you have lots of ways to make it. It's something you can actively prioritise - "I
need more gold for relationships, so I'm only going to do conquests that improve my trade; I'm going for those gold mines; I'm not going to build those ships; I AM going to build those buildings, because in 10 years they'll give me double the gold and by that point, I will need more relationships."
Lots of opportunities for strategy. I think that would work really well.
In "game mechanics mode" - tiny nations should require less, even a fraction of, your relations slot, while maintaining an alliance with a France blob, for example, should require 2, 3, even 4 of your available slots depending on their size.
Want to ally with a dozen OPMs? Go for it - each one will occupy one half of one relation slot.
In Soviet Russia, does Russian bear want to ally with you? Okay, but it will cost you 4 of your 6 relations slots because they are ungodly massive.
This part I'm not fully sure of. I think the principle is very clever, and logical. My concern is from game balancing.
Every important relationship for a small nation is going to be really expensive. The blobs can ally dozens of little nations, but the OPMs can only ally one or two blobs. Although this makes sense, doesn't it also make the game even harder for OPMs and easier for blobs? Which is already the case in a lot of the game. The strong stay strong and the weak get eaten. Unless the weak are played by humans, but even then, I've heard a lot of people say that the game often boils down to "You do really well and can't be beaten; or you lose quickly."
I wonder if this system exacerbates that problem.
But maybe with some tweaking, it doesn't have to. Certainly blob-to-blob alliance could cost a lot to both sides. Maybe OPM-to-blob alliance could get a discount for the first alliance, allowing the OPM to form at least one strategically important, safety alliance.
Then there's the fact that each alliance is a two-sided thing. An alliance between blob and OPM will be costing asymmetrical amounts. The alliance is relatively unimportant to the blob, and costs relatively little; it's relatively important to the OPM, and costs a lot. That of course sounds like it makes a lot of sense. But it again seems to favour the blob getting blobbier and the OPM staying OPM, or eventually dying.
So I wonder if the game could take note of who actually wants the alliance? If the blob sends the alliance to the OPM, then the OPM gets it at 50% rate compared to if the OPM sends it. So if the OPM really needs that alliance, and he has to propose it, he has to pay full whack (maybe with the aforementioned discount for the first one); but maybe he can be smarter, and "butter up" a few blobs, maybe do a couple of cheaper RMs here and there, and hope the blob sends the alliance request to him. After all, the nation that sends the alliance request could be thought of as "doing all the groundwork", thus lowering the cost for the other side.
That is getting a little complicated, and maybe there's better ways. But I do feel there needs to be careful attention to balancing between blobs and OPMs. Of course it's
meant to be harder to function as a small nation, and it's OK for it to be so: but that's already the case throughout the whole game, so I don't think this mechanic should make it harder.
As an aside...
This would help curb 'vassal-feeding' just a bit - not prevent it, but hamper it just a little ... but I do think it should be cut back just a bit while making straight-up conquest a bit easier.
On an aside - I agree that IF straight-up conquest is made easier, we could limit vassal feeding a bit. But I have a huge worry about anything that suggests hampering it, in case it happens
without the associated changes to direct conquest. I therefore as a general principle never propose anything to harm the current mechanics, but will start doing so if/when we do actually get, first, the corresponding, necessary direct conquest changes.
You remember InnocentIII's thread "We need to nerf vassal feeding", the whole point of which was "it's silly we have to do this - direct conquest should be easier." Johan made one single comment in that thread, which was "OK well if the community wants us to nerf vassal feeding I guess we can.."

It's stuff like that I worry about, that they might get half the message and not the important bit!