You're reading way too much into my analogy, but sure, go with your Hawaii version. It's an analogy, they are not exact, just, you know, analogies. To give you a sense of the idea.

Why not? You'd have to ask Frank Herbert for a definitive answer, but the next best is to read the books. There are many factions involved, the emperor is not actually in a position of absolute authority. The Great Houses, the Spacing Guild, Bene Geseret, Bene Tleilax and others also wield influence. There are checks and balances in place (by custom, by law, by force), and one of those is that the Emperor does not control Arrakis directly. It would put him in a position with too much power that the others (envious or desirous of semi-selfrule) would object to, probably violently. Arrakis is also a source of great wealth, and by giving it out to specific Houses, the Emperor is granting a favor (at least on the surface) and buying their allegiance.