Ah, thanks for the clarification.
I haven't liberated them since G&K so I didn't realize the mechanic had changed. I just remember in Vanilla liberating a civ only to have them absolutely hate me.
There's a "you restored them from annihilation" modifier, which is a permanent strong positive, now.
Though they will always ask you, the turn after liberating them, why you have a large number of units in their territory...
The diplo vote is worth-while but I generally avoid diplomacy victories, they just seem to easy for me and kind of cheesy when it often comes down to who has the most money.
If you're playing them as intended, they very rarely do come down to who has the most money. You can get a maximum of about 90 influence from money per CS per turn (with 1000 gold), and if a rival courts them game-long that won't be close to enough. In my current game I have over 400 influence with Warsaw, very little of that from gold spending - I've spent more gold on Sidon (under 300 influence). I no longer need anything close to that level of influence because Austria decided to declare war on me and bought her own CSes, so can't possibly get any votes from CSes or take them back however much money she has, but if this were a more 'open' game with more rivals, or a peaceful game, she would have no hope of buying the CSes from me despite her huge lead in the gold department. Money (and coups) only make a real difference if everyone's focusing on CSes at the last minute, and so no one has much more than the minimum influence needed to ally CSes. But that doesn't often happen in G&K, since AIs also realise that you need to complete the quests.
Also, while you almost always need some CSes for diplo victories (unless most of the CSes have been taken out), you still often have situations where a civ rather than a CS will have the deciding vote - in that game where I liberated Elizabeth, I did indeed win diplo victory (which required 7 votes by that point) by getting exactly 7 votes - largely because my rivals' first response to my building the UN was to capture Jakarta, and attack all my other CS allies (ineffectually, as it happened). So if I hadn't liberated her I wouldn't have won, at least in that round, and without having to invest more in CSes (or finding a way to liberate Jakarta).
As for the buffer zone, that's totally legit. But for me, I don't usually do it just for a why not factor. I'm the total opposite, I'm more happy the more AI's get knocked out of the game because I find it more fun/challenging to face a few big Civ's than a bunch of little ones. Difference of opinion on that, though.
I like to play heavily diplomatic games, so the more factions there are, the better (and of course this is another advantage to a liberated civ - if you DoF them, and other civs also DoF them, you strengthen your own ties with more important civs than the one that's liberated. They can also strengthen the effects of your denouncements with their own denouncements of your enemies - who, since you liberated them in the first place, are likely to be mutual). Having a one-city civ doesn't prevent another civ becoming the runaway.
EDIT: Also, I always find larger maps more challenging than smaller ones, so I'm not sure the "few big civs" theory holds. I'm in a duel map game on Immortal in which Austria's making an effort, but if anything it's less challenging than most of my Emperor games on larger maps. Fewer civs competing for Wonders, less variation in tech paths means I'm more likely to get the techs I beeline before the competition, fewer rivals to spy on - and, yes, fewer enemies to denounce me and reinforce each other's dislike.
Edit: Haven't seen them liberate a dead civ.
Me neither, but then I've only very recently seen them liberate CSes, and only twice so far.
Also, do you still get all the negative modifiers (they covet your land, you have contested borders, etc) when you liberate a dead civ that you used to get if you bordered them or keep some of their cities?
I haven't the two times I have liberated civs in G&K (although I did share borders), but from recollection neither of those civs contested my borders beforehand, so I don't know if this has changed or if it's just a case of those particular civs not having those modifiers with me. Elizabeth did lose the 'Warmongering menace to the world' modifier I'd earned with her after declaring early war on the Huns (before they attacked her, and in response to their attack on Kuala Lumpur).
i wonder what diplomacy benefits you can get if any if you just give the city back to them through the trade window. that should be a big boost for friendship. doubt ill try it but it sounds interesting.
You get a "We traded recently" modifier, but I don't know how strong it is and I doubt the AI distinguishes between giving back their recaptured city and giving them a new city you took from someone else.