You guys do realize that your suggestions would worsen the problems you want to address? Realms with extra regions would refuse to appoint lords to them, because losing the city knights would result in much too great wealth loss. Realms with 15 regions, but 15 nobles spread over only 10, would be stronger than realms with 15 nobles spread over 15 regions.
Also, Indirik, I fail to see how it's legitimate to dismiss cases to the contrary when trying to prove a point. Even without the dramatic tax tolerance reduction, tax efficiency alone, in its current form, is enough to remove all monetary incentive to expand.