Rebels are not overpowered, they're dangerous as heck and you really don't want them happenning - this is good.
HOWEVER - that said - there are some instances of rebel uprisings that are just, let's face it, retardedly powerful, absolutely unrealistic and impossible to believe. And some of them do truly make the game unplayable on the long run.
Case in point ,you're a colonial power. You set up a colony somewhere and it turns into a full fledged province. Then you core it. Then after maybe half a year you get a peasant rebel uprising there asking for lower taxes. Compositon: 4 regiments of the latest tech infantry you have, in a city that you founded maybe 3 years before. Heaven's sake - there's not even enough people in that city to form one regiment and I have to deal with FOUR?.
Better yet, they just popped up in puerto rico. Good luck with the naval disembark effects with the force you bring to beat them down, because unless is twice the size of those guys, chances are you're losing them in the try.
More case in point - let's say you go and conquer part of the Aztec Empire as Spain (the mere fact that you can't annex it the way it happened historically is bad enough - good luck doing so. I tried and the overextension killed me. But that's a whole different topic and belongs to an "historical colonization is impossible in this game"). So yeah let's say you rip two or three provinces off the Aztec empire and you turn them into your own. Of course you have to core them, but in the meantime a nationalist uprising happens. ELEVEN regiments of the latest tech you have suddenly popped up in a region you just conquered.
I'm okay with the numbers (after all you've conquered an already settled place). I'm not with the fact that those guys have muskets. If they're natives they'll have to make do with aztec maces, otherwise it makes no bloody sense at all. I mean, is not as if some eleven thousand aztecs just suddenly found a lot of arquebuses and pikes to turn themselves into Tercios. Right?....RIGHT?.
It's even funnier if what happens is yet another "peasant revolt". REally, those peasants must be growing muskets on trees. Otherwise someone tell me where did they find the weapons to form those arquebus based formations.
So yeah, let's say that in most cases rebels are not overpowered. In some other cases, however, they're utterly ridiculous and downright OP to the extreme. It is not normal that to ensure rebels not making my life impossible in my recently founded caribbean colonies I have to keep a 15 regimental force permanently there (with the associated naval transport), of course 15 regiments that count against my force limit, and of course having around 20% of your overall force doing guard against ridiculous rebel uprisings in the colonies means that I have France next door with 88.000 troops and 75000 manpower blobbing half of europe and I can't do crap against them. And that's happened for the fourth consecutive time. Yeah, is my fourth game as Spain. Learning the hard way and I'm not one to go back to a savegame, I start from scratch using what I learned in the previous fiasco. Three previous games ended as soon as France proved an unbeatable thing to deal with. This is well into the way to be a fourth same-case-scenario because, simply said, I can't colonize AND keep those guys at check at the same time. Is materially impossible.
They should make rebel composition depending on the nature of the rebellion. If it's a peasant rebellion, for sure they won't have enough muskets to form tercios or later infantry. If it's a native uprising, same story, limited to the tech the natives had when you conquered them. And in some cases they simply should NOT happen or happen with much lesser numbers of regiments spawned, if it happens in a newly established colony.
And now while we're at it please whoever made the conditions to the foundation of spain must be kidding us with an useless option. Diplomatic foundation?. Give me a break. Aragon will NEVER marry anyone with the castilians as since the very beginning they make you their rivals and refuse any offer you make no matter how hard you invest in increasing relations with them. But then again, that's another totally different topic.