I think it probably needs to be slightly more complex than that (perhaps a mechanic to explicitly abandon a region if density is low, so that you can prioritize keeping the ones you actually care about, and potentially even move the realm bit by bit if part of the problem is your location)
Definitely, because without some ability to control which regions your realm governs, it could easily end up with isolated realms separated/surrounded by rogue regions with the realms unable to close the gaps because their takeover option is disabled.
Also, it might be worth thinking about whether the takeover option would be disabled just when trying to take a rogue region, or whether it would apply to all regions. If takeovers were also disabled when your low density realm was in a war with a high density realm, it could be pretty frustrating. Essentially not being able to fight back in any constructive way.
