Agelastus,
Yes, my thought was that this pseudo-nation would have to be Pagan and its cities ought to be placed in such a way that they don't block exploration, or adjoin another country. They have to be found via exploration. One (or an AI explorer) should have the option of either trying to conquer one of these cities or going around it. My whole reason for this idea was to have a place-holder for real cities, rather than just natives who more often than not are already wiped out. This was why I also thought all the pseudo-country's cities should be controlled by PIR or REB.
One thing I did learn when I tried to play as China, and playing around with this idea confirmed it, is that Pagan countries are unable to initiate diplomacy with any country which does not have its capital on the same continent. Thus, China can talk to Japan and the Mogul Empire, but not to Spain or Portugal, though Spain, etc can talk to China. So, if the pseudo-country's capital is in Wewak, it can't talk to anyone, and only the Christian and Muslim nations can talk to it, once they discover it.