I totally agree with this idea of titles. Mixed with dynamic civ names it could make RFCE have a lot more civs even without adding anything new (LHs, civ options, UHVs). The trick is your name changes as what you possess is different.
About grouping smaller titles into larger titles and all stuff related to this discussion, my idea is simple: Historical titles found on those extensive lists monarchs used to have should be implemented for aesthetical purpose. Those should be listed in an advisor, all as said before, but when you talk to the leader, it should be titled with the most important title it has. If King of Galicia is inferior to King of Spain, the leader is King of Spain. If the King of Aragon is the King of Castile, and not of Spain, both these titles are equal, so the leader is the King of Castile and Aragon. If the leader becomes Holy Roman Emperor it will appear only as Holy Roman Emperor, and all other titles would only appear on that advisor.
Dynamic civ names should be related to the titles, that would make it a lot more realistic, and would add lots of civ names even without adding whole new civs to compete with the ones that already exist. If you are the ruler of the Spanish Civ, and you only have Galicia, you are the Kingdom of Galicia, and the King of Galicia. If León is indy, there's the Kingdom of León. Indies are the Kingdoms, Duchies and Counties out there, not accounted as a full civ, but still there.
I have to disagree with merijn about the Hungarian example. If you are the King of Hungary and is expelled from Hungary, and only rules over Bulgaria, that doesn't mean your people fled with you and left their homes for austrians to take over. Hungary is a place, a territorial dimensions linked by culture and costums, and its people will majorly remain there for their lives are tied to that place, even changing names, rulers or conquerors. Austria will get the Hungarian provincial titles, but I agree that if the King of Hungary is still there, this title should not fall to Austria.
Thinking about that, there's an idea: After a civ gets a bigger title (King of Spain, King of Portugal, King of France) only by collapsing it could be owned by someone else. So (imagining the extra civs from RFCE++) if the King of Aragon loses the needed provinces for that title to the King of León, we will have a King of León and Aragon (not necessarily in name, but surely in titles) and the former King of Aragon will be reduced to something smaller it has (obviously only if it doesn't collapse). After this original King of León becomes King of Spain, it can lose all the Spanish territories and only keep Tetouan for example, but it will still have the King of Spain title, and should be treated like that.
I think that solves the issue about Bulgarian Hungary still having the King of Hungary besides only having Bulgaria, and making it possible for the King of León to become the King of Galicia, if León is taken. We could put some stability related to titles too, like if you get a bigger title, you gain extra stability, if you lose provinces needed for a bigger title that you already have you lose stability. But that's another big discussion to come.
The Titles idea is amazing, but as it seems we will need a lot more discussions to come with a final idea.