Yes, the real outcome of the warmonger penalty system is that the experienced player will use gamey workarounds. Such as:
1) Don't take Major Warmonger penalty cities. Use them as target practice to up-level your range units. The limit is a zero-strength city. Hence also the warmonger penalty system further nerfs melee and buffs range.
2) If an AI civ threatens to take a zero-strength target city, either a) hold off attacking for 1-2 turns (depending on AI civ force strength), so that their melee units will die uselessly in capture attempts, a nice way to whittle down the AI civ; or b) if their force is too big, surround the target city on all 6 sides if possible so their melee can't get through (thanks Jon's 1UPT!
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3) Constantly renew friendships with as many AI civs as possible, to reduce warmonger penalties. Strictly speaking, this isn't 'gamey', just a bit tedious.
4) CS's are sacred. Once everybody invariably hates you, the CS system will be your only friend (kinda makes the Mongol UA a curse in disguise). Makes Patronage mandatory, plus any SP that leverages CS trade.
You can also game the reverse of #2 above, by allowing a Civ AI to take the target city after you are done using it for target practice, in the hope that the warmonger penalty will tip the game against *them*. Especially a threatening warmongering AI civ. Thanks to the combination of overall happiness + science + warmonger penalties, a warmonger AI civ threatening to runaway is much easier to contain and rollback than a runaway builder AI civ.
The strategy is to put off being the world's #1 warmonger until the last possible moment. Ive been practicing this using Austria since they have the option of peaceful annexation of CS'es, suffering only the "you're expanding too much" penalty - I assume puppeted cities add to this penalty as well as building your own. The approach is to do the classic Tradition/Liberty 4 cities speed setup (tommynt?), mixing in Patronage as the game progresses. Everything beyond this becomes a puppet, including select AI cities, but only if a) penalty is *minor* b) friendships are plentiful, and c) the city has growth potential and is geographically easy to integrate. Otherwise sell to AI civ that you want to bring into an antagonism with another, nearby AI.
A variant could be played with Venice, and you could skip Liberty, except that you may have quite a few puppets late game, and Liberty's Wide bias attributes could come in handy then. In both cases you are likely to go with Autocracy.