1) Should I use the German names for states? Examples: Wien instead of Vienna, Niederösterreich instead of Lower Austria, etc.I think so. It would make it feel more authentic.
2) How do you create a territories with a cut-out in it (exclaves)?You select both and then use the difference feature.
See:
http://wiki.warlight.net/index.php/Inkscape_tips "Cutting Holes" for more information
3) Should I include the micro state of Liechtenstein in the mapHECK YEA!!!!!! Liechtenstein is never going to get it's own map (at least a good one) and plus, it's just awesome!!!!