Ok, the ranks from canon-rules-tables from HG2 (I know, you don't buy them as canon. Hans) put three ranks of admiral:
O7 Fleet Admiral
O8 Sector Admiral
O9 Grand Admiral
In a fit of irony, he scouts go to higher O numbers..
Anyway, If we assume there is in fact a duke of the marches, who is separate from the Duke of Regina/Mora, that is one of the "Right People", as are the grand admirals of the various departments. Likewise, there is at least one, maybe more, grand admiral at Domain HQ (Remember, the domains are stated to have been retained in naval use, even tho Strephon finally filled some besides Core... and the others had been vacant for a long time.) Now, such a promotion is only one rank... and obtaining a command slot. NOT a major promotion... no matter how junior an admiral he'd been.
Here's a case where the rules canon provides a clear dichotomy: ranks linked to command level... so a non-commanding Fleet Admiral would probably be a fleet or subsector command staff admiral, like, say intelligence for Regina's nummbered fleets and/or base; the base is probably also commanded by a fleet admiral, as are each of the fleets. Naval history is filled with cases of command by position taking precendent over rank. (And people like D. MacArthur taking command by rank to be dressed down for not havin had authority to do so... because a clear authority had existed which they broke.)
Canon also says that Norris was recalled from Naval service shortly before the 5FW... DUe to both the Duke and the Heir being killed. Norris was the Spare, not the heir. (MT, also the interview with Norris, either TD or MTJ, don't have them handy at the moment to dig for it.)
Working admirals refusing promotion: several in the US Navy have done so, some explicitly saying no thank you, and a couple by threatening to retire if promoted. While I don't recall specifics for either US or UK individuals, I've read that at least two brittish admirals refused promotions that would have moved them from fleet to HQ.
As for the problems of a sector duke and a subsector duke having the same world as headquarters: not really an issue. The sector duke would have very different matters at hand; the local world would be doubly represented in the sector moot, but other than that, one is concerned with local matters, and the other with regional matters. Quite analagous to the US sistuation of the Mayor of a State Capital, or a Count/Duke of a place with a Royal Castle in the middle of his fief... there are several in England which fell that way even during medaevil times.
Id' say that, in all probability, there was no Duke of the Marches until Norris pulled the warrant... and made himself such, setting the stage for the later self-promotion to archduke. The Sector Capital then being a matter of where the NAVY says it's sector HQ is... Likewise, Regina is also pretty evidently one of the major IISS centers... so as a capital, it's got EVERYTHING. Like I said, nothing I've seen says the Aledon line was the duke of the marches. Nothing says they weren't either... but with Norris as DoR, if Regina is capital during his rise, either
1) Norris isn't back yet, and his father patronized Santanocheev
2) Delphine is Duchess of the Marches, and patronizes Santanocheev, and uses the threat/declaration of war to move the capital back to her homeworld
3) Someone else is Duke of the Marches, and Norris gets even by use of the warrant.
4) Norris is DotM, but NavComDomDen promotes Santanocheev to command and tics Norris off.
Likewise, IMTU, Regina has both a Duke of Regina, who is the SS duke, and a Count of Regina, who is the plantary noble; additinally, since there are several significant worlds in the system, each of them is IMTU a Barony (for the lesser significant worlds) or a Knight-Baronette (for the less significant), vassal to the Duke as their Subsector Noble . Not really a problem, again similar situation to Mayor/Governor dichotomy. Different scope, duties, and resources.
If we assume each SS has a FAdm o8 for each departement, plus one for overall command, then add the sector admiral with one per department and one for command, we can make the FAdms total over a hundred. But we then also wind up with about 6-8 SAdms... only one of whom is actually in command. I prefer to think he's Junior in 1105 due to being in a position for a lesser grade, and not having a slot to move to...
As for a graying navy:
4th frontier war 1082-1084. 20 years later, the mid level officers who survived have a vested interest in stying to retire... and the bulge of officers coming in during a war (it is a truism that war begets an increase in enlistment and new officers) are coming to the close of careers; most of the career officers in the mid-grades (commanders) now have sufficient decorations to coast upon the rest of their career... 20 years later, that's 5 promotions, maybe 6, have now filled the commodores and FAdms, and earned retirements... many more will be 25-30 year vets, staying to keep long-standing careers going for the prestige (and potential for something "Ennobling" to happen and get cured by themselves). Almost all the flag officers would be 4FW vets, simply due to the rate of promotions.
Norris, however, is YOUNG enough to not have served in the 4FW (4 terms, IIRC, before becoming duke. He is doing college during or just after the 4FW.) This means he's not tied to the TL14 strategies Santanocheev was raised in. Also, Norris IS canonically an Intel Officer specializing in Intelligence, and serving in the Sector (and probably subsector). Quite Likely, Commander Aledon served under FAdm Santanocheev, and the latter stuck to old theories despite evidence of changes.
If Norris had been Sector Duke, he could probably have cashiered Santanocheev, rather than simply relieved him, during the war.
Additionally, if we assume instead that santanocheev was not fast promoted until reaching flag, and was a career intell officer, it puts him being a pre-4FW mid-grade....
If Norris had served under Santanocheev, that could easily explain the lack of cooperation of the Admiral with the DoR, Norris. Add to that Norris' willingness to concilliation with the Zho's, and the great likelyhood that Santanocheev either saw action or provided intel for action in the 4FW... and you have motive for non-cooperation. Classic staple of military history: Young, bright, and correct leader stopped from taking action by Old, Traditional, Conservative, and wrong higher leader... Until action proves the older no longer capable of winning.
In any case, Norris is listed as Duke of Regina, never as Duke of the marches in the materials I have.
Also, MTIE says (on pg. 15) that the Dukes are titled as Duke of (Name of subsector or sector). Hence, Neither Norris nor Delphine are the sector Duchy holder. Perhaps it was vacant.