Is there any way to do that? Worked hard to make my merchant republics prosperous, but then noticed the sultan of Sicily just annexed Amalfi 
You will only be warned if he attacks somebody. Not if he gets attacked.One way to reduce this kind of thing is to revoke the titles of infidels. Without holy wars (which results in large amounts of land changing hands), there will be more peace in your realm in general.
It's also worth mentioning that if you mark the ruler of Amalfi as a character of interest (the star when right clicking him), you'll be warned if someone DOWs him. When he dies, mark the new ruler.
Guess a restriction would be counterproductive if you wanna play a count and wanna expand over other counts or dukes. Some sort of restriction should be establish.There isn't really a way. If you have Conclave you can enforce realm peace, but it can only be done once every few years, so if vassals start to attack each other before the cooldown you can't do anything then. Making your vassals more powerful doesn't work either, because then THEY start stealing vassals.
What annoys me like hell is when they steal MY vassals. I mean, it pisses me off when the duke of Moesia steals the count of Philippopolis, but when it's the duke of Nikaea stealing the count of Kaliopolis - who is MY vassal - how can they get away with this crap?
But they will form the kingdoms themselves if they can. I usually give out Crimea and Cherson, they form Taurica, Jylland and Sjaeland and they form Denmark, and so on. The 10% limit on merchant republic vassals isn't so restricting if you play something huge like Roman Empire anyway. You could even give Venice a titular duchy from somewere (Man, Socotra, Gotland) for the lolz so they form the Kingdom title.You can't give kingdoms to mayors/doges. At least if you're feudal.
What I do is either create merchant republics out of duchies from 1 duchy kingdoms (Venice, Navarre, Britanny) or create merchant republics from duchies that are part of the kingdom that I personally own.
He will have a strong claim on his former lands. He won't keep them.I wonder what happens, if the price-bishop of an arch-biscopric becomes pope?! Will he still hold the title prince-bishop or does he name a successor or does he leave my realm? I HAVe the law active, where titles leaving realm is illicit.
Giving him K_Sicily is a terrible idea though, as you severely limit the amount of MRs you can have as vassals. Sicily can easily bottle you up to one MR for most of the game, when you ideally want 4-6 spread all over the map.
A better idea would be to only make MRs out of small de jure kingdoms, and small duchies that are part of your primary kingdom.
For example, as Byzantine Emperor (Kingdom of Greece) Adrianopolis and Venice make for perfect MR pairs, as they do not really interact with one another until late in the game. Another one in the small kingdom of Taurica (aka Crimea,) and another at the de jure kingdom of Asturias works as well. I would maybe throw a bone to Brittany, but best not to as Brittany is large.
If you aren't Christian the duchies in Jerusalem are all valid, as you can't form the kingdom anyways.