I've managed to do it. Released Croatia, sold them Istria (also had conquered Ragusa). Then sold Crete and all my Italian stuff but Venice and Friuli to Naxos. Like 360 diplo to annex them. Bit of a pain.
Did you need 200 relations or not?
It really is a pain, and slows the game down quite a bit at the start, I think it's worth it to have the empire on your side wherever you expand, and being able to expand in Italy. Though I guess with the new achievement you'll want to give it all to a vassal (a vassal italy perhaps)