Historically protectorates were lands which could be taxed heavily in exchange for military protection. They had no standing armies of their own, only town militias as police forces. So Rome created them all over the Mediterranean as a big (but eventually dwindling) source of income.

In RTW it doesn't seem to work that way. You make someone a protectorate, and either 1) they take ALL your money (the buggy version), or 2) they take nothing, but give you nothing in return for your military protection.

Without someone coming forward with a "I found out how Protectorates are supposed to work!" thread (or on the rare chance that CA find and answer one of these questions), I'd say simply ignore the Protectorate option for now. The only thing it does as far as anyone can tell is either rob you blind, or give your protectorate a nice environment to recover from your attacks in.