As far as I have seen there are no penalties. The distance to capitol does seem very much dependant on travel time rather than sheer distance, islands suffer and I have had several get a boost halfway through a year because a passing ship seemed to reduce the distance penalty.

Moving your capitol is also a very good way of keeping fringe provinces loyal in the first few years while you sort out the cultue problems, or kill off much of the population to offset squalor. Move the capitol nearby, especially if you have a new child due to come of age soon, and the distance penalty vanishes.

As Julii I was forced to move my capitol to byzantium as soon as I took rhodes. Even with the collosus it would have rebeled but Byzantine capitol made the distance penalty manageable, though I stil needed daily games. Itm took lots of destruction of un cultural buildings, a good governer and the whiping out of over 5000 people before I could safely move my capitol back to italy, for the sake of spain.

Great feature!