Yes, I believe it's stated somewhere in game that vassals do count towards province limit and I've seen/had it work for me, they're good to make in some provinces just to get reliable trading partners late in game. I haven't tested if you can win if you make a vassal to a region you're supposed to own in order to win the campaign (like most neighboring provinces for any clan).
I'm just worried about vassal loyalty after Realm Divide.
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