[quote=@Avali]
So having one of these smaller nations rule as a Theocracy is okay? 

Or are they forced to publicly acknowledge Dragan's Deities as the only true ones, making a Monotheistic Theocracy impossible?

holy big words ^^;
[/quote]
Yeah, a theocratic nation should be fine. Dragan's religious enforcement has been lax, so as long as nobody uses religion as a pretext for anything dangerous, it shouldn't attract any unwanted attention.