I like the idea and had situations where i would have used this.(Old Madina, where dukes where called governors and lords land owners, even knights wheren't called knights but citizens)
It adds allot to the unique atmosphere of a realm.
The problem with not knowing what a title means could be easily solved by adding a simple (Lord) or ( Duke) behind it.
For example: Sir Franz Katzenkopf, Furblop of Darfix (Duke) thus he is the duke of Darfix.
The current system can already be confusing for less experienced players, where we can pick between a few select options.
Its already useful to add game title in brackets right now i believe.