I agree, in highly populated areas there will be smaller provinces = more cities also with my system, because there were so many important cities in highly populated areas. Highly populated area = many important cities is true in most cases, so in practise, both our systems would lead to the same map in the end, except perhaps some minor differences in lightly populated areas.

And the fact that so many bandits could move around means the control was often limited, even several centuries later bandits could move around and raid in France, among other places. The important stuff the way the R:TW engine is constructed, is whether the cities you include could have been subject to siege and assault. Smaller cities didn't need to be conquered in the same way, as they'd usually surrender when the larger cities fell, with only few exceptions.