QUOTE:
I disagree that this idea brings is disadvantageous to the smaller nations. A small faction has one big advantage: lesser upkeep for armies.

Let's take Moscow and the Pechenegs as an example. IF I send Moscow's entire army to another kingdom which is only moderately located, than my military upkeep costs go way up in the sky simply because I have a larger force. If however the Pechenegs send their entire army to the same location, than they will surely have a much smaller military upkeep than Moscow simply because their force is smaller.

However, the Pechenegs may not be able to break the defenses of that faction, but I might be able to do it simply because I have more knights.

So, in fact, by introducing mercs the smaller factions could have a superior offensive force, which in turn could allow them to break the defenses of that faction. This idea is advantageous especially for the smaller factions.

A large kingdom with a large army will probably never hire mercs when fighting a distant kingdom simply because it cannot afford to do so, but a small faction could hire them.