A couple clarifications:
1) Where can I change the government system of the realm? I am talking about the realm being a Tyranny, or Monarchy, or Republic, etc, and not the way council positions are elected.
You don't.
This is only possible when the realm is in anarchy. There are two ways to get the realm into anarchy: either have it completely fail a ruler election, or lead a successful rebellion that takes the palace by force. (The ruler stepping down to let the rebellion succeed will not result in anarchy.)
Changing the government options that you *can* change, such as how positions and lordships are elected/appointed, will change nearly all aspects of the day-to-day government operation. The only thing that won't change is the name of the government style, and some of the mostly-transparent underlying mechanics. Things such as the ruler's daily location bonus, and a few other less-obvious things.
2) If I create a new duchy from a city that already has a Lord, will that Lord automatically be promoted to Duke?
Yes.
The new duke will remain lord of the region as well. He can then step down and appoint someone else as lord if he so desires, but does not have to. The new duchy will also only have a single region, that being the region in which the new duchy is created.
As far as I'm concerned, a ruler should always be able to found a new army. So if you find that you can't, please report it as a bug.
To the bugtracker!
My EC character is ruler, and not a lord or duke. He has no option to found a new army.
It should be noted that if your ruler is *already* the sponsor of an army, then *all* army options are open to them, including the option to create a new one. It's just those poor sods that don't already have one that are locked out of creating one.
