I prefer the way it stands now, I use the civil war mechanic to my advantage during war to turn a portion of the enemy's forces against them. Even in peace, it ties in especially well with espionage-oriented civs that can destroy improvements, and cause dissent to potentially create vassals for themselves. The one issue I do have with the civil war mechanic though is that revolts consisting of one city don't become their own civ, and as a result can't engage in diplomacy. I think also from an immersion perspective diplomacy shouldn't be restricted.
Also in general I haven't had my revolting cities become a vassal of the AI unless I happen to be at war with that AI. I think the reason for this is if the AI were to make the separatists a vassal, they would declare war on you by doing so. If they are at war with you during the civil war, the separatists are also at war with that AI so it makes sense for them to ally with the AI because they likely have a weak military and couldn't negotiate favorable terms (so they capitulate to the AI). If the AI creates the vassal and declares war on you its most likely a reaction to your dip in military due to your civil war. Most games I lose are a result of this because your military will rapidly deteriorate. Because the consequences are potentially game-losing, I tend to avoid civil war as much as possible by limiting my expansion, focusing on religion early game, and timing my golden ages with my unique wonder/ great people accordingly.