I'm not sure any political faction getting concessions can make up for having been conquered. I can't think of a real-world example where the conquered have been truly pacified except by ceasing to exist.
Early Roman Republic and its Socii system. It worked so great that at some point some of conquered communities started rebellion with a goal to bully Rome into annexing them fully.
I would imagine that ideally, yielding power to your factions in semi-autonomous regions should decrease your overall effective empire size.
Honestly speaking, that sounds awfully game-of-thronish. Player sit on his iron throne and decide which piece of land will he throw at which of eight vassals so they shut the blorg up.
Just spitting idea: why not JUST local autonomy? I imagine a system where sectors differ strongly in its ethics composition, where they can (with proper laws setup) elect who actually govern them, and then that governor - being from faction representing ethos of most POPs in given sector - would add to faction power in central government, similar to the way generals in Victoria 3 add to their interest group influence.
Yes, that would mean laws mechanics would have to be basically rewritten to something like Victoria 3. Yes, that generates a lot of problems, as victorian equation of time * factories => democracy can not be copied to Stellaris. I said I am just spitting ideas, didn't I?
I don't have a clear idea of what internal politics should look like (besides linking factions, sectors and governors) but I think potential outcomes should be as game-changing as the end game crises or war in heaven. Have your empire change its government type against your will. Have it break up into smaller empires. Have it 'become the crisis' without you instigating it.
I think if outcomes were big and consequential then players would enjoy engaging with it. Especially if we could use espionage to foment Stuff in other empires.
Civil war simulator. Don't treat it personally, please, I'm taking your post as counter-argument to argument that nobody wants to make internal politics into civil war simulator.
but its stuff like that where every nearly every single big thing in this game is your own choice to do it without much national discussion or reckoning for it, and how it creates an interactive void.
As i wrote, I think copypasting Victoria 3 law mechanics to Stellaris would be hard, probably prohibitively hard (as Victoria is rigged for one direction, i.e. getting from agrarian aristocracy-led monarchies to liberal industrial states to social republics, with alternatives in form of fascism and communism; such clear direction IMHO do not work with what Stellaris is about, nor with what I want it to be).
But I DO think that, from static perspective of single separated mechanics, Vic3 laws are better than Stellaris laws.
I can imagine - again, just spitting ideas - such legislature being extended to handling new issues starting. For example, you just get technology to genetically alter POPs. Now you have to decide on law regulations, and then push them through your factions in legislation process, or else you are in quasi-anarchistic state that spawns random events left and right.