I made a couple protectorates in 1.2. The first one was Pontus, Thrace.
Didnt check whether their cities add to your total cities. There was no more of your money being spent to paying them for being your protectorate. However, I could not see any influx into my cash funds from their end. The tributes/diplomacy stayed 0.

I also checked the amount of money gained before havin a protectorate and after. I could not see any difference. ???

Also, it is really a waste of time. In one instance I made Pontus my protectorate, then the next couple of turns I attacked Parthia, which is somehow allied to Pontus. lo and behold, Pontus decided that they should cancel their protectorate status with me and support Parthia.. So next time, make sure the faction dont have any alliance status with any other faction when u assign them as ur protectorate.