[quote=@Shorticus]
3) is exactly what I'd love to see. It doesn't have to be our Europe specifically, but our "Old World." I'd love to see an exploration age at some point in this roleplay, so 3 is exactly what I want. And we shouldn't know much about the New World when it finally appears on the map. We might have old documents that hint at its presence, or certain folks might actively go there (English fishermen were actually fishing off the coast of North America for a while before it was colonized), but we should effectively know jack all about what's over there.

If I had to choose between 1 and 2, I'd choose 1. But again, I don't want to lock our minds around the idea of "Europe." What if someone wants to play a China-like empire? Or something reminiscent of ancient Babylon? Heck, what if someone makes something that doesn't quite fit into something from our world at all? Etc.

(I'm debating between what cultures to draw inspiration from and what fantasy species I want in my empire.)
[/quote]

And as you've pointed out, 3 would create another issue: the problem of differing cultures. 

If all our states start next to each other, then there's going to be a mixing of cultures, until we're all one big blob of likey-likes... just like Europe, barring the odd war monger or genocidal maniac. 
 
A society like Ancient Rome and a society like Ancient China would hardly coexist, unchanged, if living side by side for five hundred years. More than likely, they'd have a bit of a merger, and end up with a bastardised form instead. 

Getting around this hoohah:

Identify 3 starting areas on the map, allowing players to pick either of those three. Categorise the starting areas as: "Westernised" (Roman/Greek/Egyptian like cultures), "Easternised" to cover the more outlandish nations that reflect the likes of India and China, and then an "Exotic" area, where literally anything goes. 

It wouldn't work perfectly, but it would at least stop the Marshmellow Queen from living next to King Edward Longshanks.