Distant attacks will have to be removed.
-You can't break the balance of power that much...you'd have to redesign the campain setting too.
-Distant attacks have no place in holdings contestings - a holding's individual power ends in each province.
-Especially for priests, guilds, law holdings...The only way you could share power between holdings in your system would be if for that entire turn any activated area's generate no RP, GP & the same with all lay lines, trade routes, seaports, etc ran by that holding. (as to transfer power, you need to pick up the personal and move them in to range)
-There is already a distance attack of sorts in 2nd & 3rd Edition: Domain wide representation of the organizations power is RP, lieutenants, and the regent that already exists.

How does regency come in to play for this system too - would a regent with a less holdings be able to pump up his attack/defense/hp by adding RP in to the pool? How do you limit this effect?

One of my other considerations was what kind of sense does it make for this combat to happen with the insurgancy spell being used as a domain spell in 3rd Edition (mass contest)?

If you're going to complicate the system of domain handling...at least do it so it's based on skill and not raw holding power. I'm not talking about skill bonus - I mean smaller weaker powers able to better use the level of provinces they have. Maybe because they have the support of their regent more often & their people are more inspired or whatever.

When ready, try to strip out some more things...leave some of the adjustments for the DM, we don't have to spell out every bonus or penalty. Especially considering that you already have two other systems of combat (battles & pc adventure). Domain turns already take forever - especially for new players & DMs.

Try to maintain what the holding system already has too:

-It limits all actions by locality of the province & those who have holdings in it
-It represents overall power in liuetenants and regency points
-It basically gathers RP & GP in a simple organized method

If you can keep it simple & only use holdings in the province, it would make good varient rules...but if they want to get that involved in attacking that much - maybe they just want to roleplay?