As an aside, my father spoke Latin and Italian, but not Spanish. When he met Spanish-speakers in a social setting, he would try to talk to them: he'd say something in Latin, and they'd say "I got most of that but not this word or that word", then he'd repeat it using Italian where they didn't understand the Latin. It was slow, but they could understand each other.
Regarding Checco's post, if people are interested we could make a community cultures mod or a community enhancements-to-stuff-outside-Europe mod. I don't think Paradox is going to do much more with the game given that they've given the Magna Mundi group the rights to use the engine, and in any case Paradox hasn't shown much interest in anything outside Europe recently.
From what I've seen so far, most people agree it makes sense to split Korean and Japanese into their own culture groups, and one person made a good case for splitting Tibetan from Burmese. Ryuku could be a subculture of Japanese (but it doesn't make much difference because they're Animist religion, so whoever conquers and converts them will change their culture.) How Manchu culture should be classified remains an interesting question. (I've thought of starting it as "Jurchen" culture, in the Altaic group, and then allowing it to change to "Manchu" culture, in the Chinese group, around the time of Nurhachi.) Presumably the three provinces of Yunnan should have their own culture - if so, would it be Burmese, Tibetan, or Thai group?
Here's a question for the more knowledgable of you: what religion should the Manchu be classified under? On the one hand, they don't seem to have had a problem with religious revolts after they took over China. On the other hand, they seem to have been quite similar in beliefs to the Buddhist Mongols. Should they start as "Buddhist" with an option to change to "Confucian"? Should "Buddhist" and "Confucian" be distinguished in game terms? As far as I know nobody fought holy wars between Buddhists and Confucians the way the Europeans fought wars between Catholics/Protestants, Catholics/Orthodox, etc., or the Muslims between Shiites and Sunnis.
I'm somewhat the reverse of your father: I know Latin and Spanish, but not Italian, and I too found that I could understand much of Italian, but not quite, during my past trip to Italy. But with a bit of vocabulary from a travel phrasebook, I found I could communicate quite adequately enough for travel since I already had the Romance grammar basics down and basically just needed to know more Italian vocabulary.
Back to your question, at the time of the game, Yunnan was a mix of all the ethnic groups you mentioned, plus Han Chinese. For most of the several centuries prior to the Ming, the ruling class tended to be of the Bai ethnic group. The anthropologists aren't sure of their exact relation than that it's definitely Sino-Tibetan. Their language is hypothesized to be an early split off from Chinese during ancient times, but it's hard to tell since their language has continuously borrowed from Chinese throughout the centuries and it's hard to tell apart the indigenous vocabulary from the native one.
In game terms, Yunnan would be a mixed bag, but some of the southern areas, (Xishuang Banna), I would make Theravada Shan (in the Tai group). The cities, like Kunming, would either be Confucian Bai, or Han Chinese (I'm not sure at which point Han becomes a majority), but Bai I think would be justified as part of the Chinese culture group. Outside the cities, I think it should probably be largely pagan. There's over 40 ethnic groups there in modern times, which can't be represented in game terms, but I think putting pagan Bai or pagan Shan works for this purpose.
The Manchus were Tibetan/Mongolian-style Buddhists, and never stopped being so even in their course of Chinese rule, but they also adopted Confucian trappings in addition to this, as Emperors would literally perform quick-changes when going from administering with his ministers to greeting Tibetan religious embassies. This could be represented in the game with the Manchus (after controlling China) have either Confucianism or Buddhism as their state religion, but have full-tolerance for same-religion group religions. Mongols on the other hand, would have Buddhism as state religion, but intolerance for same-religion group (historically, during Mongol rule, they allowed Taoist monasteries to be confiscated for Tibetan Buddhist purposes).
Edit: In terms of Confucian/Buddhist holy wars,
Buddhism actually was actively persecuted several times in Chinese history, as it was seen as a strange foreign religion. It came to be accepted and tolerated a few centuries previous to the EU3 timeline. During the EU3 timeline, Confucianism and Buddhism were in conflict in Korea, as the pro-Neoconfucian ministers in Korea suppressed Buddhism, ended state religious support, closed monasteries and so on. In game terms, Korea during EU3 had low tolerance for heretics during this period, while China had opted for the "Declaration of indulgences" decision some centuries earlier.