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About modded nations : you can play them for fun, who cares if it's imbalalanced as long as it's fun ? Anyway MP games diplomacy often goes against the more powerful nations ...
And note that "vanilla" nations are clearly not that balanced - make a poll of who will take Ulm or Mictlan vs Caelum or Vanheim lol !
Alternative methods for "balancing" is either to "bid" for nations (a referree has to manage how the bidding is resolved through either map editing or playing a neutral nation), or to make some "conflict managing" rule about nation choice - for example everyone lists their 3 preferred nations and only get the 1st one if they are no other player choosing it first, etc..