I think that there should be TWO seperate espionage options: 1) Incite civil war-this should be VERY expensive, and should only work if the average level of unhappiness in that empire is above 50%, and/or if more than 50% of the empire's cities have more than 2 corruption! If it works, then the chance of a city breaking away would be based on the total corruption of the city, the level of unhappiness, the number and average strength of troops garrisoned there, the distance of the city from the Capital and the culture of that city (as compared to the average). A city that breaks away will become a new civ, but they would be just as susceptible to culture conversion as any other city-so might get immediately absorbed by a powerful neighbour!
2) Incite Coup: Just like it's described above! Again, very expensive, and the chance of success would be dependant on unhappiness/corruption and what government they have, as opposed to what government options they have!
I also agree that the puppet state, or Protectorate, idea. I really liked that in SMAC, and can't see why it can't be brought back for C3C-given that Civ3 is based on the SMAC engine!!!
In fact, I think that ALL of these ideas could be incorporated into the existing game with very little effort.
Yours,
Aussie_Lurker.