I have found that the diplomacy system is actually quite "playable" despite many complaints about it. I am currently playing a grand campaign as Venice (H/VH).
I have found that you can make treaties and with relative reliability keep them if you give tribute/gifts to the faction you are in alliance/peace with.
For example, 100 florins per turn has kept the HRE off my back as Venice with trade rights granted all the way, even though they are also allied with my enemy, Milan. It seems that a continued tribute makes them hesitant to attack you.
Also, I keep an eye on the relationship meter and when it drops to so-and-so I give some gift, like map information or 500 florins to get it back to reasonable. I also think that the longer you have had peace with a faction, the less it takes to keep the relations up.
The second thing to keep diplomacy up is to ally with the pope and keep gifting him with suitable stuff (not necessary regions even though many do this as well). I find that a 100/turn is enough to keep decent standings as long as I also give some 500 florins as a gift if I do something to upset the pope.
So far I have consistently kept England, Denmark and HRE in peace, with England and Danes as allies even. This also helps with trade income, which in turn helps with the tributes.
The gifts do not have to be big, just that you have to keep on giving.
The odd part is that this sort of skews the game against the player, but I suppose it must be so to level the field a bit.
I tend to make up for this by selling off trade rights and alliances to other factions, which will in time betray me, attack and then when I beat them they will again pay me for the priviledges.... The trick seems to be to keep a few (2-3) factions gifted up and happy, so you have some safe fronts. Also, make sure that you have a diplomat in their areas. I suppose that muslim nations are more of a problem for the player as there are plenty of enemies that will probably not even take the gifts.
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