Idealized view of Ruritania
Europe has some of the world's smallest countries - Luxembourg, Andorra, San Marino, Liechtenstein, Monaco, and the Vatican City - and before German and Italian unification, it had many more. These little kingdoms appeal to romantic story tellers, who often invent their own, such as Ruritania in the Prisoner of Zenda. Such countries offer setting for swashbuckling with steampunk technology.
Swashbuckling in Virtual Europe
In general, the best sites for virtual countries are Italy before 1861, Germany before 1871, or the Balkans through 1914; there are enough real small countries there to make it easy to suspend disbelief in one more. Another option is to set virtual countriess on boundaries between major real countries. Imaginary islands are also worth consideration, so long as their presence would not have substantially changed the course of Atlantic exploration.
What impact will virtual European countries have on history? Often, very little; novelists tend to to imagine them as archaic and picturesque, or as too small to be effective. But advanced technology and efficient organization can make a small country disproportionately effective, as they did Portugal, and later the Netherlands. With steam technology, a seemingly unpromising nation might emerge as a leading European power.
Stoddard, W.H. (2000) - Gurps Steampunk, pg. 118, SJG:Austin
[edited for removal of game specific content]
On an associated note - during my search for graphics, I ran across this site called "City Creator", and enjoyable little game, which will help you dispose of plenty of hours at work...