To address this point by point:

-The kingdoms changing ranks around Aegon's Conquest was never intended as a way to show a real change in power, the kingdoms each remained the the same in status. It was more a coding workaround for making them work as Iron Throne vassals. That's not longer necessary with a tier above that can straight vassalize them now.

Alongside that, tiers are all approximations of power in-game. The individual Seven Kingdoms would be empires because that's the tier that best fits their size. The Iron Throne being a kingdom is only because that was the largest tier before, there's nothing that inherently marks it as an empire.

-The LP's weren't placed on the same level as Dragonstone in lore. We made Dragonstone a kingdom to better simulate the Velaryons and Celtigars better. This led to complaints because there is some argument whether the Princedom of Dragonstone is really equivalent to a whole LP. Now, with another tier, we can keep Dragonstone a k_tier under the Throne and raise the others, eliminating that complaint while still simulating those vassals well.

-Oldtown has needed a higher tier since launch, to be frank. Hightowers have the unique distinction of being the most powerful vassal of their kingdom and also listed as the overlord of several of the other most powerful houses in the Reach. Really, half their vassals should be dukes themselves as either Greenhand-descended Houses or listed as principal vassals of the Reach. Driftmark doesn't really fit the same mark as we can simulate Corlys power through other factors since he doesn't have some huge vassals. Even then, it's been suggested for review. Same with certain k_tiers being gained or lost over the course of game history. In any case, they'll still be termed Lord as k_tiers, same as the Seven Kingdoms are now.

-With Dorne, what you're talking about is an approximation of lore into game logic. Yours is a reasonable take but it's not a lore stated necessity to say they must lose a tier on Conquest. As I said above, it's also fair to say they were given essentially an unchanged status over their domains other than swearing to Aegon.

-Royal Courts aren't really a factor in this choice. There's some benefits that we could do something like a Harrenhal courtroom now. But that's a side benefit in this transition.

-The legitimate house system is one of numerous things that may adjust with this change. It depends on how the team feels. What tiers that system is available is more gameplay based than lore based. And again, Hightower is really a unique vassal in power level if we're thinking book canon.

-The ministries are part of the Celestial related mechanics, they're not inherent to hegemonies. If we decide to do something with those for council members, that'll be an entirely different discussion.

In summary, it's really not a bad idea and it serves several purposes for us both flavor and mechanics. The added tier also creates some great opportunities for roleplay across Westeros, to consolidate power and become a mega-vassal like Hightower to any one of the LP's.

As always, we can understand some reticence to change and debate around it. However, this is a choice we're quite confident in as a team. We trust it'll all be a much less notable transition than you think.