That's what I meant. The point at which they are willing to capitulate, at least in my games, usually means that they are significantly crippled, usually down to 3 or 4 cities. But then again... I usually have a very low power ration. If I had more troops, they would probably capitulate sooner.
This can be true, but if you don't cap him he/she will probably just cap to someone else. While they won't necessarily be a problem themselves for the rest of the game, the crazy way it skews their master's power rating makes it MUCH harder to beat
them into submission later; I've had AIs refuse to give up until dead because they had a vassal before... A minor headache now to avoid a worse one later.
There are also still useful purposes for a vassal.
Vassals with only a few cities can also still be good techers on high difficulty depending on the leader/land quality, and are still subject to AI trading rules (no WFYABTA between them, lesser tech value in trade, etc) so they can help you collect techs from the rest of the field since your vassal will always trade it to you if they pick it up. Beware that this goes both ways (ex. if you trade them a monopoly you have like MT or Rifling they can and will trade it away for other stuff and proliferate it before you may have planned!)
If they CAN tech somewhat they make good internal partners to bounce techs off of to catch back up. One example: you go up the Steam Power/AL/Physics line and have your vassals work on Combustion line, then swap around techs. This helps a lot trying to get all the way up to Industrialism much quicker.
You can always gift cities back to them after they cap to you for different purposes. Can be a good idea for culturally crushed cities (they can't flip it back from you, but can revolt it over and over if you don't station a garrison) or to strategically close up a border to keep the next target form coming to you without going through the vassal's territory first. Depending on the difficulty only gifting a few cities back can restore their teching power and sometimes you can get away with only gifting back cities to one vassal and keeping everything from the rest going forward if having a teching partner is more helpful. Usually you want to keep as much land as is feasible form the first target though.