I doubt this would lead to a higher noble density, just more rogue regions.
It would also lead to less fun for lords who just need to sit in their region the whole time trying to stop it from revolting and less war and whatnot in general if there are whole realms that need to do that.
I imagine that improving the knights' estate mechanic (maybe coming at some point in the future when Delvin has timeTM)) will give extra benefits for having more knights rather than disadvantages for having less and that seems a fairer way to go.
