Here's a simple system I used to great effect when I did this. It requires a bit of Fiat, but is a good shorthand to let yourself know how things are going.
There are three 'stats' for the kingdom that describe its general state of being. The number ranges 1-20, high good low bad. this is the d20 system, might as well go with that. The stats are security, economy, and popularity. They can go up or down depending on campaign events, PC/ruler choices, and various negotiations and deals with factions and different merchants. 10 is an average rating for a medieval city-state or small kingdom. And they can influence each other as well.
Security is how safe your citizens feel. At a ten, they are reasonably safe, though there are dangerous areas in the slums and various monsters in the wilds. A low security rating means crime is rampant or there is an invading army in your kingdom. This will penalize both your economy and popularity as people cannot trade safely and let's be honest, you aren't really protecting your serfs. A high security means people are very safe and most wilderness areas have been cleaned out. This boosts your economy but decreases your security. Mercahnts will flow in knowing their caravans will be safe, but safety can breed contempt and ambitious nobles or merchants may try to make a move on the throne.
Popularity is simply how much the people like you. With a low popularity they are cursing your name and may give shelter to spies or traitors. With a high popularity they are singing your praises and erecting statues to you. A low popularity hits your security because of the possibilty of insurgents and your economy because no one wants to trade with a region that is having such problems. A high popularity decreases your trade, because the people have such faith in your they tend not to work quite so hard. On the other hand it boosts your security because the people are intolerant of spies and traitors.
Economy is a measure of the general trade and productivity. A high economy means yours is a rich state, while a poor rating means you are a backwater. A good economy boosts popularity, since the people know they always have a meal coming. On the other hand it can decrease security because of the number of foreigners that are coming into your kingdom - it's easy for a spy to move amoung them.
I know my reasoning may be a bit of a strech on some of these, but I like the rock-paper-scissors aspect of it. I don't want to to mean 'all I have to do is get everything high and we achieve Utopia'. Ruling is all about compromise and finding a balance. In general, when a rating hits 18, 19, or 20, apply a hit or bonus to the other two. When a rating hits 4, 3, or 2 apply a hit to the other two. If any of the three reach one, the other two do as well. When this happens, the people revolt.
In keeping with the spirit of making hard choices, the DM should try to apply both a bonus and a penalty to PC chocies. For instance, say there is a tribe of orcs that continually raids the caravans. The PCs have no time to deal with this themselves, they are busy rulers! They decide to offer a 1gp bounty for every orc ear brought in by adventurers. This will certainly work, giving a +2 to security. However this drains the nations' coffers, reducing the economy by -2.
Also, don't simply tell the PCs what their ratings are! They should have to judge by themselves, or more likely have NPC advisors that can, perhaps with a Profession (advisor) roll get a judgement on how things are doing. Even then, tell them that 'the people really like you', not 'your popularity is 14'. Similarly, don't tell them exactly how much the orc bounty will impact the economy, only that it will. Then they have to decide if the increased security is worth it.
It was pretty successful when I did it

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Edit - wrote this before you edited. Personally, I'd go with MMS:WS to create the areas and my little system to run it.