Even by having the rebels as minor factions would severely limit expansion possibilities specifically the computer ai. In the beginning turns, everyone generally makes alliances and take rebel provinces. If there are no rebels, and everyone has huge alliance chains, the computer will be afraid to attack most factions seeing as how one minor faction may be allied to one normal factions and other 5 minor factions. To the human player though it is less limiting, but could still be tiresome. Picture you there just taking normally rebel states when the Pope suddenly gets pissed at you for just wanting to annex a small piece of land into your empire..
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