The lore zealots are gonna have a field day, I personaly like the idea and think an rpg like TES could make it a deaper and richer experience. We've had small things like this before and I'd love a quest for it.
Like theres a town being attacked by powerful dark monsters in the night and you have to find out what is killing all the towns people and save them and when you do you become duke of the town or something like that and can start rebuilding.
And then what? Everyone starts calling you duke and you can pick up your monthly earnings from a chest in your office?
Well, with radiant story we might actually get a few more options than what we had in for instance Oblivion. Personally I found it quite boring in AC, but I'm sure it could be done better in an Elder Scrolls game -- still -- it's mostly gonna be 'randomized' (yeah, I know it's not only random, but couldn't find a better word) quest after a certain point. I don't know how long it would be interesting....
But I'd like to see them try. If they fail, people on this forum will at least have something to complain about... and mod.
Anyway on a related note... isn't duke the ruler of a duchy, not just a town?
edit: Btw, why didn't dragon attack occur to me straight away? .... Bet you're gonna save so many towns from dragons after a while that if that's the reward, you'll be the king of entire Skyrim in no time