My idea for effects when the captital is lost is this:Goverment turns to anarchy,all armies are paralyzed,cities cant be controlled anymore,and you get a X% chance for escaping the goverment(you) as a non-combat unit(if you had horses in the capital,with 2 or 3 moves) with capabilty of activating and joining a number of X units it meets,but turning them to conscripts.After X turns all paralyzed units are gone.If the leader gets into a city,he can create a draft goverment and control this city.Meanwhile,other cities,alone or in groups,can turn into indepedent states.After creating a draft goverment non-indepedent state cities will be controlled again by you,
but until you build a palace you can build only conscript units.The other states are like other civs until you build a palace,when the will either join you,agree to join you under conditions(e.x.permanent governor in a city and part of the taxes which go to him-with the ability of breaking the deal and have the risk of revolution or disorder),or remain indepedent until you conquer them(no resistance).