In my opinion a sovereign of Papacy should be curent Pope (not the Doge, as it used to be because they didn't rule Papacy) which is elected as most educated cleric among the catholic nations as it was before.
Papacy could consist of several cities around Rome (5 for example - https://en.wikipedia.org/wiki/Donation_of_Pepin).
Educated clerics in catholic nations may go through some process of becoming cardinals (when they gain some knowledge, convert province, pay some money to Papacy) and when Pope dies a new could be elected only from cardinals. Blue field when cleric is elected for cardinal can become red.
Donation to catholic church that existed in old game should stay and be called - St. Peter's Pence
Kingdoms which are donating often should have higher possibilty for their cleric/cardinal of becoming Pope.
Elected Pope can stay in Royal court of country where he is from just as it was before , but his picture should appear as a reigning sovereign when clicked on Papacy.
When Papacy is completely eliminated, the one state which liberates it should give Pope and + relations to all catholic kingdoms as before.
*It would be great if all knights could advance in their fields not only clerics becoming bishops/cardinals/popes in catholic kingdoms, or mitropolits/patriarch in orthodox, mula or reis-ul-ulema in islam.
Marshal could become senechal/admiral/general/tactician through battles, merchants could become trader, marketer, economist, capitalist or specialize in trading for something that was not part of their duties in earlier version of game such as glass or gold (there are no gold mines in KoH1, only silver - just sayin 😀), spies could become masters of espionage/assasination/sabotage/camouflage/intrigue, diplomats could become ministers, ambassador even maybe and be sent to countries in order to achieve some goal. All of these 5 classes could be upgraded through - money, experience, time spent in position, success in perforimg tasks.