At the moment we have 2 type of vassalage:
Pacific: agreement between two states for temporary (10 turns) protection
Capitulation: this is the one that blownup in the game, it should be similar to an unconditional surrender (like Germany after WW2).
But it seems that Fireaxis see it in a different way ... not very clear to me.
I think that to keep the gameplay simple, Vassalage for Capitulation has some big problems in single play:
- the master's diplomatic relation with everybody else suffers far too much for accepting a vassal
- it's possible to declare war against the vassal to hurt the master
- the master has no way to change the arrangment in future (to some extent only the vassal can)
- too few "pressure" points for the master against the vassal
In an ideal world (or better civ implementation) there should be different levels of vassalage-peace threaty, with possibility to smoothly move from one to an other:
0. no diplo relation / truce / peace threaty / war
1. open border I: only for commerce and pacific units (missionaries, workers, settlers), 10 turns renewable
2. open border II: as it is now
3. mutual defence: as it is now
4. alliance: similar to defence, but doesn't break down after declaring war, 10 turns renewable
5. protection: the master agreed to protect the vassal and have a tigher integration, similar "pacific" vassalage now, the vassal must vote for you in UN elections, you get bonus and malus at diplo relations according to the vassal's diplomatic relationships, the master see all the vassal territory and science targets, implicit open borders, 10 turns renewable.
6. vassal (protectorate): pact that can be a result of a war, but can also be a move from protection.
The vassal giveup its diplomatic relations (that remain frozen until the pact is cancelled) and inherit the master's diplo relations.
The vassal cannot wage war independently (but can suggest war/peace to the master).
The master can pretend (vassal cannot refuse without war) resources, technologies, and GP.
The master can suggest what strategy to use (defend this down, retreat from this town, attack here), the vassal may or may not follow.
30 turns renewable.
7. unconditional surrender: only as a result of a war. The vassal giveup its diplomatic relations and cannot wage war/peace independently.
The master can pretend resources, technologies, GP, conversions, civics, towns (only once, and only for max 25% of population).
The master can impose the strategy to use (vassal cannot refuse).
Only the master can choose to cancel this pact.
Ok, so far so good, but there shall be a way to cancel these pacts (especially 6 and 7).
The way to cancel is to propose (in time of peace) to change the agreement from the current "level" to a an other one.
The move of one level can be smooth and has no direct diplo malus between the two contractors.
Every pact can be broken in special conditions even before their natural end (e.g. before 10 turns); but an earlier cancellation will bring heavy diplomatic malus with all civs due to your untrustworthiness.

For example A has a pact (any) with B.
C is a very strong civ and decleare war on B.
A can decide to cancel the current threaty.
A will get diplomatic malus vs B (very heavy) and vs all other civs.
The diplo malus will be calculated according to:
- type of pact (the higher the level the higher the malus)
- diplomatic relations between A and C (small malus if friendly, large malus if bad)
- cumulated duration of the pact (the longer the pact the higher the malus)
Honouring the pact will give a small (+1) relation bonus with all civs.
naturally there are a lot of details to work out, but a similar system (if the AI can understand it) will give many more options in diplomacy, making in CIV diplomacy a more interesting part pf the game to play.