A few issues I've thought of
The first has been mentioned:
I wonder what happens when your capital gets captured. Do you get to annex one of your cities and make it the new capital? Do you run an empire consisting entirely of puppets like some sort of Illuminati? Do you just lose instantly?
Also, it seems as though Venice cannot win domination; what happens when you conquer a capital? You can't raze capitals, and Venice can't puppet or annex cities. Taking over capitals for domination: impossible
Venice has enormous drawbacks for diplomatics: Many votes come from city-states, but as Venice's only way to grow is to poppet city states, amount of city-states in the world diminish. Can puppeted City-states count as votes anyway?
OCC challenges mostly ended in cultural victories, because having a tall empire had its benifits then, but with culture victory revamped, it seems as though here too wide civilizations have a head up front.
Science Victory is also close to impossible, because you would have to get a bunch of city-states bought with Merchant to get the science that the other extremely wide civs have in the game due to number of cities. I don't think you could get enough Merchants efficiently while making sure:
a) Venice isn't loosing too much food from specialists
b) great scientist points can still be made for the tile improvements
c) citizens are still used to make the production needed for science buildings and defensive work (OCC often fall victim to wide cities if they don't concentrate on defence)
Lastly, I wonder, how will you protect all your lands, because city-states will surely not be crowded all around you. The city-states you buy will end up beng a ways away from you, and if your empire is spread out too much:
a) its hard to defend your lands
b) many civs get mad at you for taking their lands
Im sorry if I have brought up points made already, but these things really make me wonder about Venice and how the civ will work out.