The weakness in this is that why hasn't he at least conquered a wide RADIUS around Kal-Saitharak? Well... I didn't say the plan was completely perfect.
It may not be perfect, but it's one of the most interesting new ideas I've heard as an explanation for the Gorgon's inability to conquer Anuire. I'm not sure if I like the 5% per province idea per se, but the basic premise that the Gorgon is tied to his seat of power in Kal-Saitharak is really very good. There are a lot of variations on that theme that could be played out - like time away weakens him, rather than distance. Or just monkey with the distance factors a bit (I think 5% per province is a bit harsh - if I used that idea I would tone down the penalties somewhat).

Heh heh, it might do very well to explain how the Gorgon got all that xp to level up so high, though - if he's only fighting enemies at a certain percent of his full strength, then he's effectively a lower level character, which means lower CR creatures should still grant him some xp awards when he defeats them. Very pat. B)