I thought all these effects were reasonable. Vassals/puppets/satellite states could get into wars over border disputes, and could also drag their parent states into a wider war.
Or, you could ignore it, and risk surrendering your influence in the region when your vassal coughs up some provinces, or gets annexed.
Even the five-member alliance limit wasn't horrible. It was trivial to deal with up to four vassals, but at five it gets tricky and requires some talent. That was fine with me, and even though the mechanism was arbitrary, the effect wasn't unrealistic.
It could definitely be improved, especially the alliance thing, but I very much don't want vassals converted to fully subservient provinces of an empire. That's what the diplo-annex option is for. If you don't want to do that for some reason, who should have to deal with the complications.