[Omnirizon]

I'm not for sure, but I think the rationale is something like this:

R'yleh is considered unbalancing because they destroy population. a player who ends up facing off against LA R'yleh in MP will have little to show for it afterwards, while still needing to spend the same amount of gold/gems to keep the war going to the end.

Suppose there are four nations, and one is R'yleh. One nation goes to war with R'yleh, while the other two go to war. Once the dust settles, even if the player facing R'yleh wins, simply because the lands they have gained from R'yleh are now absent large portions of their original population, they will be much worse off then whoever won amongst the other two nations.

For that reason R'yleh isn't really permitted into too many MP games, it would simply be an unfair misfortune to have to go to war with them. Same thing for LA Ermor.