Duchies can not be part of other duchies. Only regions can be parts of duchies.
The confusion results from both the duchy and the region being named Itau - but these are two entirely different entities. That is what is new about the new system: Duchies and city regions are no longer the same thing.
The confusion also stems from the fact that signature do not yet display the new hierarchy correctly. I can confirm that dukes who are not lords of cities cannot sign "Duke of..."; I am 90% certain lords of cities who are not dukes still sign "Duke of...".
