hi , i have played on other servers from other country's with these settings and the thing is like this (im not 100% sure it's the same like where i played..but the world there was called "classic" too and was having almost if not exactly the same settings)
let's say you have a village named 001.You build the academy and you create 3 nobles .Then you conquer a village (let's name it 002)and you are having now 2 nobles on the 001 village . If anyone or you with another village conquer your second village (002) you can create another noble on the 001 village and you'll have again 3.You cannot have more that 3 nobles on a village , ever.
sorry for my english but i hope you understood