Navarra
Historically, Navarra was military annexed.
But, certainly, the merging of nations into others poses a problem. I'd go with a solution similar that the one we have with rebel nations. In EU1 when rebels control a minimun provinces assigned to a rebel nation, that nation is created and becomes independent. We can do something similar: if one nation gets to control a minimun provinces of a "merged nation" the player is given the option to change his nation for this new one. Better with an example
Player A plays as Castille. He gets to control Gerona, Catalonia, Valencia, The Balearic Islands and Aragon. But he still doesn't control Grenada or Navarra. The player is the given the option to create the "kingdom of Spain". He can receive a lot of VP's for doing it, and perhaps some other benefits, like giving the rank of national provinces to the conquered provinces or a stability boost. If he further conquers other historically Spanish territories (Navarra and Grenada, Portugal could be discussed) those can be also added to the kingdom and also receive the national province status.
What do you think?