This situation could be prevented. Only allow religions with, say, at least 6 elders (thus at least 3 priests) to use this feature. Tiny religions just aren't influential enough to hurt the reputations of powerful nobles. Only allow a person to report a message as heresy once every week, to prevent system-spamming (or create a penalty for frequent reporting). Another option, and one I dislike, would be to limit how frequently reported messages can be ruled heretical. This could be a hard cap, which creates problems of how to resolve the "waiting list" of messages, or some kind of penalty for frequent declarations: if you declare lots of things heretical, then peasants will start abandoning your religion as it gets too restrictive.
I am not sure where you get the idea that you can only have twice as many elders as you do priests but I don't believe that to be true. H/P hits could still happen with smaller religions it would just be a smaller hit, with hits being proportional to the size of the religion. Honestly I don't like the idea of prestige hits as someone being declared a heretic would make them more known and perhaps more prestigious.
