This a difficult issue. I'm in principle opposed to culture multiplication, you never will find a point to stop, and you will soon end up with a nightmare; for example, most people from Baleares and Valencia will strongly object to being called 'catalonians'. When is proper to add a culture? In my opinion, when the difference caused a _permanent_ effect that can be represented in the way EU does, i.e. lower income and increased problems.
Following this guide, I would be in favor of splitting 'iberian' at least into castilian (note 'castilian' against 'spanish' which in the XVI century would be applied to everything in the peninsula, following the roman style), portuguese and catalonian, catalonian covering the Balearic Islands and Roussillon, too; it would be better still to split catalonian in aragonese, valencian and catalonian, because the three were kingdoms, with their own parliaments and laws; the kings of Aragon and later the kings of Spain had to deal with each one separately. In fact the term 'king of Spain' is misleading; at least until 1700 the kings didn't use this title, but a long list of kingdoms, princedoms, duchies, counties and lordships; and in France, for example, the situation wasn't any different. Sometimes I think that the best solution to the HRE problem would be to make it a nation vassal of Austria and give to every state its own culture...
But the problems will be endless. For example, the similarities between catalonian and occitanian cultures already noted, and the catalonian influence in Sardinia... and the need of adding italian culture to Aragon/Spain (one of my biggest complaints about EU2 is the wave of rebellions in Sardinia and Sicily after 1517, which is quite laughable, when those kingdoms were just like they were before; meanwhile, Castile and Aragon could use a 3% or higher nationalism to reproduce the wars of the Comuneros in Castile and the Germanías in Valencia).
And it remains the problem of ending this separation; the parliament of Aragon was abolished by Philip II about 1590 after the Antonio Pérez affair, which would merit an event by itself, and the ones of Catalonia and Valencia in 1714 by Philip V. Navarre never lost it (not even in 1939-75) and the Basque Country or Lordship of Vizcaya to use the most frequent name employed in the 1500s was and is still divided into three mini-entities, Alava, Vizcaya and Guipuzcoa; Alava, like Navarre, never lost its 'privileges', while Vizcaya and Guipuzcoa kept them until 1939. And during the XVIII and XIX centuries, until the Industrial Revolution and the 'National Reawakening' of the later part of the 1800s nationalism doesn't seem to have been a problem, legends apart.
But I'm digressing. In short, know that you are beating a hornet's nest with an stick...
