Well, personally I like to play in a historically plausible fashion. I get a kick out of role-playing so to speak. So, if I were to play a tiny minor and my provinces were all occupied, I would concede the game and resign.
The AI-controlled major nations can't do this however, so I suggest not having any tiny playable AI nations in your scenarios. I always disable all other majors in my campaigns since I feel it is more accurate.
Btw, Portugal might be an exception to this rule, since it will otherwise disappear in the first 50 years.
/Doomie