I was tempted to call it "broken". Sadly, Hyperbole always gets more attention for your issue. I know Frogboy hates it when people casually refer to features as broken, but I think it fits.  For starters:

1) It doesn't work in any logical fashion. The AI is willing to become my thrall for life at the drop of a hat, whereas they wont accept a peace treaty when my vast military machine has them down to a tiny, resource-bankrupt outpost in a corner of the map, for less than 5 times the amount of gold in my entire treasury. They should be paying me for peace.  Enslavement of an enemy Sovereign should be far more difficult to effect than the cessation of hostilities.

That can be fixed easily enough, but even so:

2) It allows the AI, already in danger of being knocked over by a strong breeze on the harder difficulty levels, to be conquered far too quickly. An option to avoid mop up is fine and good, but again, they roll over far too easily.

Again, that can be rebalanced, but:

3) It gives you an army of free champions. Even with the "Broken" penalty, they are still effective support casters, capable of leading armies.  And with the right level perks and equipment, can be pretty easily put back into fighting shape, for zero wages.

They bring with them new spell schools and powerful new buffs and global spells.

Perhaps best of all, they bring with them big Prestige bonuses, that are hard to get any other way.  You can rack up a huge prestige score with an army of enslaved sovs. Even if they do nothing more than sit in cities, it's worth it for that alone.

It eliminates the need for Champion Recruitment tech, and most armies.

(Aside: Enslaved Sovereigns really like leather greaves. They always have like ten in their inventory.  They also all tend to have similar traits. Multiple "Path" traits ...more than they should be able to have by level, usually Assassin and one other. Perhaps that is indicative of their bonuses from me playing on "Hard" difficulty, but it only makes for a more potent slave.  Perhaps enslaved Sovereigns should be stripped back to level 1)

Don't get me wrong. I'm totally in favor of a vassalization option, to help eliminate mop up.  But vassals should be a Civ that goes independent, stops expanding beyond whatever property they have left at the time of vassalization, stops building their filthy outposts on my nice clean borders,  pays you a % of their income and research, and counts towards a conquest victory. And it should be harder to effect than a peace treaty, which still leaves an active competitor on the map.

An enslaved Sovereign should be something different. To enslave a Sovereign, you should have to fight them to the last man, and hold their broken body in your hands. Instead of simply wiping out a Civ when you finally defeat a Sovereign, give an option for enslavement, or a "there can be only one" style of quickening, where you either get chunk of XP, or a spell level by absorbing their souls.  And you should probably get rid of  their Prestige bonus.  It's too much.

Two cents.