Well you managed to convert me Cesar de Quart.
I agree totally. Here's a suggestion:
=> Papal Militia Swordsman => Papal Sergeant => Papal Squire => Papal Dismounted Knight => Dismounted Cardinal*
=> Papal Militia Spearman
=> Senior Papal Spearman => Papal Sergeant => Papal Mounted Squire => Papal Knight => Christ Guard* => Cardinal*
Papal Peasant (or Pilgrim) => Papal Militia
=> Papal Militia Crossbowman => Papal Master Crossbowman => Papal Ranger*
=> Papal Ranged Militia
=> Papal Militia Archer => Papal Master Archer => Papal Ranger*
Troops marked with a * are special troops. Not sure about the Cardinals though. Just added them in for fun. 
I find it a good idea. Althouth those "Papal Rangers" are a bit odd (it would be easy to make them just Papal Guard Crossbowmen). And Cardinals are out of the scheme, totally.
I'd make another suggestion: change the "Papal" from the militians to "Roman". Rome was a big city and most of the Pope's army was not a "Papal" army, but an army made of the militians and troops from the city of Rome and other cities under the Pope's control.
Yet another thing. I find a little contradictious to give the option of "
dismounted knights". I mean, what's the point? Knights were knights, and they had the feudal obligation of having at least three horses (a destrier, or warhorse, and two other common horses to carry the page and the equipment). The only reason for which a knight would not fight on horse would be, either because the horse died during the battle (which happens a lot in the game), or because the battle is going to be set on a muddy, swampy or very rugged terrain.
But, despite this, I like the troop tree. It's similar to the one I sent Cruger as a "Feudal troop tree" model.