It's a really good idea, but Machiavelli was more about trade and political maneuvers. I mean, factions (as Venice vs other cities or merchant family against merchant family) could be added as the neutral/hostile cities. This way the player could manage to conquer enemy cities, assault caravans and so on. Even a system like the Senate could be created with the marshall feature from .950.
Problems I see (please, don't drown me under a flooding of critics and acid sarcasm tides if I'm wrong cause I'm no moder but I guess those would come from the kind of game and its scale):
-Another capital difference between galleys and cogs was speed and cargo capacity. Galleys were incredibly fast but hold little cargo, while cogs where slow... but when a "caravan" of of those arrived you earnt tons of money. Donkeys and camels weren't so different, just their chances to survive sandstorms and rockfalls.
-In Machiavelli the Prince there was factions inside the factions. The four players competing in the game were from Venice, so in times of need they allied to fight the enemy cities and the muslim/genoan armies. I'm not sure this could be done in M&B.
-Again, that game was about trading at great scale. You could customize you own caravans adding more or less guards and choosing the amount of donkeys/camels/ships you wanted. I cannot see the way you could manage your trading empire in M&B.
-Don't see how the Pope issue could be added in M&B. You know, buying cardinals, calling crusades, excomunicating (spelling?), raising the money you get from cardinals... and the elections, of course.
-Some details that were the flavour of the game, like storms, rock falls, sandstorms brigand attacks... would be nonsense in M&B. The funniest features, like the arsonist, assassin or the slanderer (and the popularity rate) would be nonsense too, or too powerful.
-In Machiavelli you hadn't fiefs. Ok, you had, but weren't the owner of its production. I mean, even if you conquered Novgorod, you still had to
buy those furs as everyone allowed to trade in the city had. This bring me to the stocks issue... Machia was a rush for stocks. No stocks, no trade, no profits (I seem a Teladi, anyone who played Xuniverse games know what I'm talking about

). In M&B as you own the fiefs and its hipotethical production (if were scripted into the mod) this couldn't be done. Thus, the trade competition would go under the property of the sources, what brings us to war.
But I sincerely hope I'm wrong and this could be done cause that game is one of the best oldschool games, ever. Maybe creating a resource system similar to that one in townstroop mod could help. I mean, creating mines, farms, hunter's guild, glassware's to improve... and weekly (or every period of time) check how the caravans do, reassign escorts, create more routes, hiring more mercenary armies and so on.
Sorry for any spelling mistakes, English isn't my mothern language.