Qwerty,
the citadel total war thread, page 1, can answer your question about factions. As much as I would love to see the Italian states in the game, it is rather hard. Only by just including the important ones(Venice,Milan,Naples?) we would have to remove 3 other factions, and I think it is just overall, easier to just have one Italian faction instead of 3 or more. Makes the gameplay less limited and gives the player more options.