Cathars or something like it could totally happen - you get a heretic in some province and he doesn't get torched but instead converts the preists sent after him and Heresy gets worse and worse untill the unrest makes the province go rebel. It would never happen to a player, of course, because a player wouldn't tolerate a Heretic running loose in their province for more than a couple turns, never mind a bunch of them for a long time. But I've seen AI lose provinces to uncontrolled heresy. Its probably a bigger threat to AI Moslem or Orthodox factions who don't have Inquisitors spawning to help them out.
As for the protestant reformation, that didn't really start causing political turmoil untill after the normal timescale of the game. Game nominally ends in, what, like 1530 or something? The real trouble didn't get going untill much later in the 16th century and then into the 17th.
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