I think that's why there is that bit in the rules where a noble can refuse to give a conquered settlement up to the King.

At least that's the way I read the rules.
Of course most of the "My city, my army" rules come from LotR where there was no King distributing settlements.

Don't know, I'm open to ideas of changing it, but the only one I can think of would be to bring back the Personal Armies and we know exactly what kind of brainf*** that was for the Seneshal to keep track of.