Second, I have no idea why creation remains tied to a region at all, but I believe this has been asked before. There's probably an answer floating around the forums.
There are different explanations floating around. My personal viewpoint, which is not universally shared, is that Duke is a personal title. You can only create a new Duke out of a Margrave because that is the next rank in order of importance; that is if you want to give special recognition to a Count, make him Margrave, and if you want to give further recognition, create a new Duchy then.
This is why the Duchies are not tied to cities. When the Duchy of Firbalt was created, it should not have been understood as "I create a new Duchy for Firbalt to be in", but rather "I create a new Duchy for Bob, Margrave of Firbalt, to be Duke of". If Bob gives away Firbalt in the future, he's still Duke anyway, and there's no reason why the Margrave of Firbalt would automatically become Duke; and if he does, there is no reason why he would be "Duke of Firbalt" if Bob still has that title.
In the end, though, there can be different ways to see the relationship between Dukes, Duchies and regions in different realm. The rules won't be changed to fit one realm's viewpoint, but if your viewpoint can accomodate the rules as they are, it's fine.
