Hmm...no I'd call it horrendously broken and unrealistic. Alliance Cascade is the "feature" that finally killed my interest in EVRVV. It's a solid idea in theory, but the implementation is just plain bad. Worse, it's ahistorical. Worse still, it's not fun. I won't be playing again until the issue is corrected, FWIW.
Well diplomacy gets more important compared to before mostly as it was something that was of almost no importance whatsoever. Though you are right that for the most part it is bad (though the change in the patch was mostly that ai actually now use it, it has always been possible to call in allies this way, only the ai never did it).
As I see it one change needed is that the only country able to call in a country powerful enough to take over leadership in a war should be the country currently in control (so if attacking Macedonia, Seleucids will only get called in if they are directly allied), and doing so should be avoided by the ai and only done when the opposition is just to powerful and there hardly remains any hope whatsoever of victory otherwise (it should reduce popularity of ruler just as losing a war does, the popularity loss could be less in defensive wars though).
And countries called in later in the chain should be reluctant to ask their allies unless they actually are directly threatened by the enemy (so in the example in the first post, the Rhodians should not try to call in their allies unless the enemy (I assume he played Rome) actually starts to prove a threat by moving his navy closer to Rhodes/conquers nearby provinces in Hellas without ending the war (ie Sparta or Crete)). So the war would be Rome (and allies) vs Macedonia, Epirus, Sparta, Crete and Rhodes rather then Rome (and allies) vs Macedonia, Epirus, Sparta, Crete, Rhodes, Pergamon, Seleucids and a whole lot of other Greeks. Depending on Roman actions the war could expand but the Seleucids would remain out of it.
Generally the ai should not call in allies if the opposition is much weaker, since what is the point? You get a few more armies moving around and the risk of someone else taking what you wanted will increase. Unfortunately all this would be very difficult to do right (I assume) since, well it is the ai and it is not something that is always clear, and it may easily get too reluctant to call in allies (making things maybe too easy) or remain a bit too eager (meaning things will remain similar to what it is).
