In order to avoid some of the possibly gamish uses of this, perhaps it could be somehow worked together with the current religious viewpoints. Declaring a realm as "faithful" if the majority of the people in that realm are members of an evil religion should cause some problems for the declaring religion.
i.e. assume Keplerstan and Evilstan both have state religions of Keplerism and Evilism. Both religions consider the other as evil, and both religions have, essentially 100% followings in their regions. If Keplerism tries to declare Evilstan a "faithful" realm (in order to, say, exploit the enhanced conversion effects), there should be some serious problems inside Keplerism. The confusion of declaring a realm full of evil believers of Evilism should cause loss of faith of significant numbers of followers of Keplerism.
This may help remove some of the possible exploitative uses of the feature, and be pretty straight-forward.
Hm.
But what about if a lot of nobles convert? You can't proclaim the realm faithful until the commoners switch?
Honestly, I'm not sure this feature request is as sound as the others, like anathemetizing, reporting heresy, religion H/P, and whatever the hell the other one I made that I'm not remembering is. Plus this would be hard to code I think. Probably best to leave this one on the backburner for now.
