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Fair enough, I'm all for it. I just give out duchies rather than kingdoms :D Only rarely will any vassal exceed more than 10% of my total army size.
The options are: none, kingdom and duchy.
"None" means it's not enabled. It's as simple as that.
"Kingdom" will allow you to give kingdoms away as viceroyalties. This makes the title owner kind of a Gouverneur instead of a King. If the person you handed a viceroyal kingdom too dies you, as his liege, will get the kingdom title back. However, his money and counties he owned will go to his child(ren).
"Duchy" will enable the option to hand out duchy's as viceroyalties.
Besides if you want to experiance it, the Byzantine Empire starts of with viceroyalties and Imperial administration enabled.