I had thought about that before too.The North German Confederation was probably 85 percent Protestant,whereas in South Germany,Catholics make up 65-75 percent of the population.So that might be a wedge to create a separate state there.But I,on the other hand had wanted to include Austria and German Switzerland as well.Culturally,religiously,historically,and dialect,they have a lot in common.For years there had been talk of a union ,they just never did go beyond talk.The major problem I see was the Wittlesbach Dynasty in Bavaria.But there was a way out there too.In the 18th century there had been talk of the trading of Bavaria for Bohemia,where the Wittlesbach's had an historic interest (they did that type of thing then).That would have given the Habsburg's,German Bavaria instead of Czech Bohemia.Leading to more stability in the Habsburg Empire,and giving the Czechs a King who could become more attuned to their interests and not be in a multinational Empire where they always would be a minority.The other main problem would be Hungary.But there would be two possible solutions available there.Hungary many times tried to break away from Habsburg rule.The most successful was in 1848,until the Russian Empire came to the aid of the Habsburg's and crushed their revolt.Well,what if the Tsar hadn't come to their aid,then Hungary could have broken away.That could be solution one.Solution two is just what took place,becoming Austria-Hungary,the dual monarchy.That would have been more as the agreement was thought of anyway.More of a German Austria as united to the Magyar Hungary.I myself favor solution one,but that's maybe just me.For over a century there had been a debate in the Dynasty as to whether German Austria,as it was know,was a part of Germany or did its best interests lay in a multinational state.I think history proved they made the wrong choice.