There were many people between Louis the Younger of Italy and Otto the Great that called themselves emperor while just controlling north Italy.
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Not while coexisting with the HRE. Because Italy is an integral part of the foundations of the HRE. It should not be something you can just leave and ignore. Once the HRE is formed, as opposed to just Germania, northern Italy should become part of its de jure.
Italy had more autonomy than the rest of the empire because of the alps making it more difficult to govern effectively. After Fredrick Barbarossa was unsuccessful in asserting imperial authority by force, northern Italy became de facto independent. Plus, independence factions don't always just look at de jure setup. Low cultural acceptance can impact factions that attempt to break away.
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Idea: Germany or Italy could be more rebellious based on where your capital is. If you set up in Germany, Italy gets rebellious, and vice versa.
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The geography update in a map painter game would be kicking over the entire hornets' nest ...
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It would be a bit more complex, but different levels of authority for different regions would represent the situation better.
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I remember that Medieval II Total War had a "distance from capital" modifier, where further-out provinces were more rebellious. Maybe something like that could be implemented here? It would certainly make it harder for players to blob the world.
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In Rome I Total War too! (They share quite a lot mechanically)
Distance from capital there a) added a penalty to cities' public opinion and b) increased income losses from 'corruption', so it made sense to keep capital close to the richest cities.
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Technically, the Italian vassals will be more likely to form independence factions due to not being dejure. But in practice, that's easy to play around, and can even be beneficial in some situations (since it means disgruntled vassals will be spread into more factions, making each individual factions weaker).
EU5's control mechanics work like that - distance from capital through owned territory, modified by terrain, infrastructure (roads, rivers, etc), and spreading much easier along a coast than inland.
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And now, as if to rub salt in the wound, the AI does it... with only two owned kingdom titles, despite needing at least three?!
