Much as I like the idea of this, we did try it, and it was totally unworkable. The problem is that a realm that is losing a war has very little incentive to grant you the legal claim to the regions you have taken. All it leads to, sadly, is a lot of griefing. 
The incentive of not to be destroyed is not enough? It's a shame (and somewhat a bit OOC)... Maybe council members/Dukes would loss a big amount of Prestige/Honour (and gold?) if their realm is destroyed?
...
Two (or three) maybe-stupid ideas:
Make looting more destructive, but only to production, and make civil work much more efficient, too.
If looting is changed to a more 'economic' level (hurrah!) Why not to eliminate the take overs? A defeated (and looting-ruined) realm would agree to loss some regions to gain peace (and access again to their looted regions), or accept the possibility of total destruction.
To make more limited wars, we could make winters destructive for any unit out of cities (or town-lands?... or home regions?). Men would fall sick and die (as occurs with starvation)! Usually, when winters comes, all wars are stopped... This would avoid the fast destruction of realms.
