For recruiting vassals, don't you have any waiting in your courtroom ? Maybe it's different in floris, but in vanilla I always have a few. Give them each a castle and the village that goes with it, they will have a 100+ army and will help protect villages from raids. I actually had the exact opposite problem at first, I recruited them all and had way too much lords... and relation problems soon followed

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Now I only recruit a lord just before conquering a new castle.
The diplomacy part is basic indeed, I think everyone will agree. People's opinion will differ about how big of a deal this is. I find it limited and would love more options, but not really frustrating or too hard either. They declare war, I defeat their campaign army, take one or two castles/towns, they ask for peace. In peace time I do quests and recruit/train troops. I'm not sure if you actually need to conquer enemy territory for the war to end or if it just makes them ask for peace faster. I think diplomacy will be much improved in Bannerlord, I don't see how the devs could fail to notice what the diplomacy mod is capable of, and its popularity.
NPC lords do have some advantages over you. No need for food, infinite respawning troops , etc. But you have a greater advantage over them, like in other games : your human intelligence. Even with good AI, and without using cheesy tactics, it makes a big difference. Also for battles, they have a big penalty : their troops arrive randomly, you get the elite troops you put at the top of your list. If an enemy army is composed of half lousy troops and half elites, they will start the battle with half of each. And you will have your best troops only, not the ones at the bottom of your list.
There is the thrill of the battle, but there are also strategic and rpg elements; to choose your troop composition, pick your battles, get money, level up your troops and companions... When you have 150+ elite troops and support companions with 10 in all party skills, the time spent raising their levels really pays off. I love this "from rags to king" (queen) progression, if warband was only custom battles I would get bored quickly.