Though the city of Ilien still considers itself free (and possibly neutral, though I think that is more the thought of others, and not Ilien itself), Ilien has been on the loosing side of a couple of war, straining quite a bit on it's neutrality. That, alongside the whole "vassal of Diemed" thing, would make me stop and consider before I did anything I thought I could push under the whole "Switzerland" concept. It *is* a vassal of Diem, and both he, and the Orthodoxy hold a bit of sway if not directly, then through Medoere and the RCS (who is the state faith).
As such (personally) I would take the whole "free city" concept with a grain of salt. Yes, it is still free in most circumstances, but free in matters of trade (as free as a semi-monopoly can be). I'm not certain, that someone escaping Diemean laws would find any respite in Ilien. Sure, the Ilineese Countess might try, but I feel rather certain that Diemed would be able to force it's will in, short of starting a war. And the countess would be aware, that going against the grain would seriously threaten her, as there is no buffer zone to be found in Medoere anymore, it's part of Diemed, and destabilize her realm... not really something I think any guilder (in any shape or size) would want without serious gain in the end.
Of course, that is on the surface... there could be many many layers underneath
Just my two-pence.
- Thorsten