While I think this is a great way to represent most rebel activity, I think it a shame to get rid of actual rebel units altogether. Aside from just wanting to use all the mechanics we have, rebels as modifiers doesn't provide as immediate a threat as rebels troops do. In vanilla, if a large rebel stack appears in the middle of a war, you may need to turn your troops around and go home to face it right away. With modifiers that's not the case. If you've already raised the levies from that province, the appearance of rebels there isn't going to be a pressing concern.
Anyway, with those concerns in mind, I'd propose tweaking the system, so that in most cases, rebels are treated as modifiers, but in some circumstances they appear as troops. For example, if you're at war or the province is isolated, a revolt would have a chance of directly triggering an uprising rather than a modifier. Or in provinces with rebel modifiers there could be occasional random events that let you choose between paying the rebels a bribe, having the revolt modifier increase, or creating a rebel army. That way you'd get rid of 90% of the rebels and solve the whack-a-mole problem, but would completely remove the mechanic of rebel troops from the game.