Calling someone by their correct name and title does not necessarily mean nitpicking. Isn't it just getting it right?
I would argue that there are different levels of formality: When discussing her latest dress choice, it seems OK to me for the tabloids to refer to her as Princess Kate. While formal announcements should of course refer to HRH Princess William of Wales. The whole point of courtesy titles is twofold: To provide a more practical way to refer to or adress somebody and to give them more than what their technically entitled to. Hence we refer to Diana's nephew as Viscount Althorp instead of The Honourable Louis Frederick John Spencer.
I see your point - although I adopt a different argument. If there is going to be a protocol for titles and styles in place, it should be used in all cases. If you are going to pick and choose from multiple forms depending on the situation, that waters down the original purpose and it becomes worthless in my opinion.
Which brings us back to the original purpose. Back when Europe's powers were truly governed by royalty and aristocracy, it was essential to be able to clearly identify a person's rank and position in society (which was defined by their paternal bloodline and - for married women - also their husband's bloodline). That spawned a complex system of titles, styles and forms of address which had to be strictly adhered to in matters of court functions, government, international relations, selection of spouses, society, etc. It was even more complex because there may be different sets of rules in different countries.
The differences between Imperial Highness, Royal Highness, Highness or Serene Highness told you who took precedence over whom. The difference between The Princess Jane, Princess Jane, Princess William, or Jane Princess of X told you immediately if she was a monarch's daughter, monarch's granddaughter, the wife of a monarch's son or grandson, or a widow / ex-wife. You didn't have to ask - the form told you everything you needed to know (assuming you were properly educated on the topic, which further created social hierarchy).
Today that whole premise doesn't exist anymore. Fewer royal houses are in power, and they are much smaller. Monarchs reign but do not rule, nobles do not govern by hereditary right, and royal marriages don't impact diplomatic relations. There also aren't thousands of extended royal family members from 100+ monarchist countries constantly traveling around Europe who have to be officially received by the host government or courts, invited to the right functions, etc. So the need for everyone to be able to immediately distinguish between a king's daughter, granddaughter, spouse, widow, etc. merely by hearing a title spoken or reading it on a piece of paper is far less important today. And getting it wrong might still be frowned upon, but wouldn't potentially end someone's career or cause diplomatic rifts.
So rather than trying to cling to a system that was put in place to meet the real needs of the 16th - 19th centuries, it probably makes sense to simplify it to match 21st century needs.
Last point - your comment about the late Princess of Wales' nephew is a perfect example. Following the rules, the honorific style "Honourable" is never spoken aloud. It is always written on envelopes (where it is usually abbreviated to The Hon) and written formally elsewhere. In speech, The Honourable John Smith is referred to simply as Mr John Smith, and The Honourable Viscount Althorp is referred to simply as Viscount Althorp.
