Make smaller provinces than the counties makes no sense to me with the current EUIII engine. I'd bet for abstract lordships or baronies, actually a way to represent land nobility. Each province should have some kind of (20% infeudated, 80% direct domain) statistics. That would state how much taxes you can raise there, and how much troops, also. You could give more land to vassals (raising this % of infeudation). That would drain taxes, but would give you more knightly and sergeant-like troops in that province. You would also loose trade value of that province. But infeudating a lordship in a province would give you a nice amount of money, that would make it worth the try in short sight. Actually, that's what happened. Let's take the crown of Aragon as an example: the kings of Aragon, whose territories were not very rich, kept on selling parts, lordships and fiefs from the royal demesne, reducing it since 1200 until 1350 to a 15% of its original size back in 1200. Troublesome situation that the new Trastamara dynasty tried to solve (and solved, actually).
Also, events would make nobles ask for more land, even virtual revolts of nobles that try to stole from you your direct domain lands in a province, following the Feudal non-written law that says "I have my troops all over it, that makes it mine", also quoted from The Lion in Winter. Thus, times of civil war and low stability would make some pop-ups appear, saying "the nobles in [some province] are taking the royal demesne!". Some troops would appear in the province, like EUIII "attack the natives" option.
That may involve a lot of micromanagement, but Feudalism was not made for huge empires, and micromanagement will force you to leave provinces to vassals, the game will force you to face the ugly and real face of Feudal reality, rather than that reduction of taxes that you get.
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What would make sense, in order to to create the ultimate realistic feudal simulator, is to make a huge, really huge map:
Provinces are Lordships (or Feiefs), and there are a lot of them, several thousands. each one with their castle and classical Feudal division: Lord's reserve, comunal terrains, and the lands given to the serfs. Each Lordship should have a % of it given to each of those purposes (Let's take Rodez as an example; the Lordship of Rodez, could be 35% lord's reserve, 20% comunal, 45% in serfdom regime). Probably I'm missing some kind of special landowning type, but those are just ideas.
Each Lordship would need a lord, vassal or not of a greater liege. This liege could be another lord, not necessarily a count or duke. Actually, it would be pretty much the same, but we should get rid of that rigid structure (count<duke<king). Titles should be earnable, like now, but also your title (let's say, viscount of Béarn) should be susceptible of improving. From viscount to count, asking the king (that's like a favour, with some paying involved). Later, to Duke of Béarn, later to Prince... in the Empire, you could become Prince Elector after the establishment of the Golden Bull.
Also, serfdom should be better portrayed. "Serfs are flying away" events, serf revolts, improvement of their conditions, abolition of the ius maletractandi, (the right to commit evil acts to the own serves, to ask them for non-stablished taxes, to request more taxes when some serf is going to be married, the famous and non-historical droit de seigneur, or ius primae noctis, which existence has never been proved in any document...). Even the process in which free landowners became serfs should be portrayed: free landowners gave more taxes directly to the king, but gave less troops, and mostly of low-medium class (from peasants to light cavalry or medium infantry).
There is a lot to develop, a lot in which a hypothetical CK2 could go deeper. Ruling a lordship had its tricks, that one could not see in a lifetime, but from the player's sight, effects of bad decisions, like scattering the royal demesne, can be very noticeable.
Take care!
PS: By the way, those province decisions are cool, but I don't see that "forced labour" as right-thought. First, the lord had the right to order his serves to work on his own reserve. Thus, the serves didn't work their own lands (well, the lands the lord gave to the family, because no serf had lands of his own, although a free man could have lands of his own and also have other lands in regime of servitude. Feudalism is quite complex). If the lord did this quite often, instead of raising taxes, he would see them lowered. He would have more food and stuff in his castle, but the average taxes he would raise (taxes that he'd recieve not in gold, but in cereal, fruits, meat and so) would be lower.
A lord did this quite often when it came to construction. To build a wall, a tower, a church, to clear a forest, to dry a swamp... This would make you earn prestige by lowering your taxes for some months or years.
